Disney's Magic Kingdom Needs an Update

Even though Robert Iger is charming, there are still limits to what he can do.
Disney is a highly regarded company that creates entertainment for people of all ages.
The chief executive's return to the corner office less than two months ago was sparked by a shareholder revolt that included the possibility of a proxy battle with activist Nelson Peltz.
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In November, after the stock price saw a historic selloff following disappointing fiscal-fourth-quarter results, Mr. Peltz's Trian Fund Management bought up an $800 million stake in the entertainment giant. The two sides have been talking since but have failed to come to an understanding. Trian filed its formal proxy challenge against Disney Thursday morning, seeking a board seat for Mr. Peltz.
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This is unfamiliar ground for the Happiest Place on Earth. Disney has never faced a formal proxy battle—at least not since 1994, which is as far back as records tracked by Institutional Shareholder Services go. But its boardroom has seen plenty of drama. The “Save Disney” campaign led by the founder’s nephew in 2004 resulted in what was effectively a vote of no confidence in then-board chair and CEO Michael Eisner. That vote resulted in Mr. Eisner giving up the chair position, and he handed the CEO reins to Mr. Iger the following year.
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Mr. Iger's first tenure was widely considered a high mark for the now-century-old company. He added red-hot entertainment properties such as Star Wars, Marvel Comics and Pixar Animation to its already robust portfolio. But that reign was also not without its missteps, at least according to Mr. Peltz.
In its proxy filings on Thursday, Trian said that Disney paid too much for the assets of 21st Century Fox. The activist also criticized Disney’s succession planning, noting that the ouster of Bob Chapek just five months after Disney’s board extended his contract was a sign that the board had made a mistake.
Disney is taking the matter seriously. The company announced late Wednesday that Chairman Susan Arnold would step down from the board while Nike's Mark Parker takes over the chair slot. Mr. Parker was one of the few on the board concerned about Mr. Chapek's management early on, according to reporting by The Wall Street Journal.
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Disney's stock may not be enough to sustain the company in the long run. Although it jumped 4% on Thursday morning, it is still near its five-year low. This is in comparison to the S&P 500, which Disney's stock has lagged behind.
Investors have become less enamored with the tough economics of streaming, and Disney's once-booming theme park business is now showing signs of weakness—which could spell trouble in the event of a global recession.
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Trian's decision to only seek a board seat for Mr. Peltz rather than a long list of demands could be seen as a positive sign. In a Thursday note to clients, Peter Supino of Wolfe Research said the activist's proposals "seem reasonable and collaborative." Disney has not yet been able to quell this rebellion.