Disney’s Bob Iger Faces Criticism of Pay, Even After Leaving CEO Job
Bob Iger may not be Walt Disney Co.’s chief executive officer anymore, but criticism of his pay persists.
(Bloomberg) -- Bob Iger may not be Walt Disney Co.’s chief executive officer anymore, but criticism of his pay persists.
Three shareholder-advisory firms are urging investors to reject Disney’s executive-compensation plan at next week’s annual meeting, saying it isn’t justified by the entertainment giant’s performance and is out of line with what peers offer.
CEO pay is a hot-button issue for shareholder advocates and politicians, and Iger has been a high-profile target. Though he handed the reins last week to one of his deputies -- theme-park division chief Bob Chapek -- Iger’s employment agreement will continue unchanged, the company said in a filing. The 69-year-old will stay on at Disney as executive chairman until December 2021.
Iger’s salary is more than twice the median of his peers, according to Institutional Shareholder Services, one of the advisory firms. The company’s long-term incentive plans allow for big payouts even if results lag, effectively rewarding him and other executives for “significant underperformance,” according to another firm, Glass Lewis & Co. It added that Iger’s pay is vastly higher than that of other executives, which “may be an indicator of serious long-term problems” with the board’s oversight.
Disney said in a statement that it disagreed with the firms’ assessment.
“Mr. Iger’s compensation in fiscal 2019 reflected the considerable value he generated for the company and its shareholders, with the completion of the acquisition of Twenty-First Century Fox and implementation of the company’s transformative direct-to-consumer strategy, culminating in the successful launch of Disney+,” the company said. “More than 90% of Mr. Iger’s compensation is performance-based, and under his leadership since 2005, Disney has delivered total shareholder return of 559%, compared to just 223% for the S&P 500 as of fiscal year-end 2019.”
The board has previously said that it had spoken with a number of large investors about the pay program and taken steps to heed their feedback, with Iger agreeing to cut his salary and incentive awards, and tighten up performance goals.
Previous Concessions
Criticism over Iger’s pay escalated in late 2017 when he and the board struck a new contract that significantly boosted his normal compensation package. It also granted him more than $100 million in additional stock awards.
Several rounds of concessions by Iger and the board, including the cuts to his salary and bonus opportunities encompassing tens of millions of dollars, haven’t mollified investors. In 2018, more than half of voted shares were cast against the pay program in the nonbinding annual shareholder vote. Last year, 43% opposed, giving the board a slim victory. By comparison, the biggest U.S. companies typically receive over 90% support for their pay plans, according to Harvard Law School.
“Concerns related to CEO pay magnitude and pay program structure remain,” ISS, which provides vote recommendations to large investors, said in its report. Iger’s annual stock awards “remain large relative to peers and continue to target median performance, which is not a rigorous goal.”
Glass Lewis and Egan-Jones, another advisory firm, echoed those sentiments. “Overall, the company paid more than its peers, but performed worse than its peers,” Glass Lewis said.
Iger received between $66 million and $72 million in each of the three past years, Glass Lewis said in its report, counting salary, bonuses, benefits and the value of equity awards from prior years that finally vested.
Disney’s new CEO has an annual target pay of $25 million. With both Chapek and Iger in place, the company will spend significantly more on compensation for its top bosses, Glass Lewis noted.
Disney’s March 11 annual meeting will take place in Raleigh, North Carolina. The company hosts the gathering in a different city each year to welcome local investors and support regional businesses. Disney owns the ABC TV station in Raleigh.
To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net;Anders Melin in New York at amelin3@bloomberg.net
To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, John J. Edwards III
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