The news that former The Walt Disney Corporation CEO Robert Iger will return to power surprised Wall Street, Disney employees and ousted CEO Bob Chapek. The company, which employs 190,000 people, has experienced a sharp drop in its stock price over the past year, by about 40 percent.
Indeed, the Fed’s rapid adoption of policy containment led to a sharp drop in share prices across the board. But the share price has fallen twice as much as the general index, much of which is attributable to damage to Disney’s reputation and earnings. The main factor is the growing distaste of shareholders at management’s support of ideological freight and the acceptance of diversity, equity and inclusion (DEI) content priorities, which is contrary to the desires of consumers.
S&P 500 vs. Disney Comparative Returns (Yearly 2022)
March 2022 has been an important month for Disney. When Russia invaded Ukraine, oil prices skyrocketed, jeopardizing park attendance forecasts due to rising transportation costs. Later that month, Florida Gov. Ron DeSantis introduced House Bill 1557, the Parental Rights in Education Act (PREA). The legislation sought to create a number of new statutes relating to public education, including a ban on classroom teaching of sexual or gender identity. in grades from kindergarten to third grade “in a manner that is not appropriate for the age or developmental level of students according to government standards.” It also explicitly prohibited public schools from preventing parents from accessing their children’s medical and educational records.
Activists quickly (and oddly enough, in the light of the actual content of the bill) started calling this law the “Don’t Say Gay” bill. Although Disney had previously donated to the campaigns of several PREA-sponsored officials, Capek initially reacted by avoiding public comment. The employees disagreed, and soon after, Capek publicly denounced the bill, offering $5 million to a human rights advocacy group (HRC). In return, the group refused to accept the donation until the corporation agreed to further resistance.
Disney stock price (2002–present)
Also in March videos surfaced about the Disney general meeting, which confirmed what many observers, including prominent parents, had suspected for some time: that the firm had a single-minded, uncompromising goal of “adding weirdness” to children’s programs. Referring to their efforts as “not at all a secret gay agenda,” the firm soon after it announced his intention to remove the words from park signs, including ladies, gentlemen, girls and boys.
In April 2022, Governor DeSantis signed another bill to remove Disney’s self-governing status in Florida. Citing the company’s profound insincerity in spreading misinformation about legislation and remaining silent on human rights in other countries, Florida MP Randy Fine commented Disney is visiting Florida. Today we remind them.”
Profit for the second quarter missed gradesand third quarter not enough income, which sent the stock down 5 percent, the biggest drop in seven years. Two weeks ago, following the release of Q4/Fiscal Year-End results, Disney’s financial outlook got even dimmer.
Rising prices and growing uncertainty about the macroeconomic environment are affecting Disney as much as any other firm, if not more, because its products and services are discretionary. But the recent arrival of at least one activist investor indicates that the elephant in the room has been identified. Ass Charles Gasparino commented in an article after activist investor Dan Loeb purchased a $1 billion stake in Disney at the end of the summer:
[c]Skillful cord-cutting is eating into Disney’s line business, including its still-profitable sports cable network ESPN. The Disney+ streaming service is growing but still losing money… In addition, there are unspecified reasons why Disney is in trouble, which industry executives, investors and competitors will tell you about when their names are not named: Woke up, don’t sell, especially when it comes to a company trying to sell kid-friendly programming and entertainment at theme parks in Middle America.
And this is more than an erroneous assumption. A poll conducted shortly after leaked videos of internal meetings found that just under 70 percent of voters (more understood as “Disney customers”) were less likely to patronize Disney after learning of its deliberate efforts to include sexual politics in programming. Disney employees too (anonymous) expression of feelings of alienation and fear before internal pressure. It’s also worth mentioning that throwing wakefulness in the face of income-generating consumers could break the already falling price elasticity of admissions to parks and the like. This is especially true during an inflationary period such as the present. One client writes what many people think:
My family and I have been regular Disney customers for decades. We vacation at Disney World every year. We go on a Disney cruise every year or two. Consequently, we spend too much money in Orlando… Disney World will lose us as customers if it continues down this path. I don’t want Disney World to be taken away from us because Disney cares more about politics than about happy guests… There’s less fun in the parks because immersion and therefore joy take a back seat to politics. Disney, please get back to Walt’s values and vision. Customer experience should be the foundation of your business model. Immersion should not be sacrificed for political correctness and mob appeasement on Twitter.
Giving in to employee demands to use shareholder property (the firm itself) as a cudgel and signaling on behalf of “progressive” interests, CEO Čapek ultimately sealed his fate. Disney executives’ adoption of stakeholder-driven governance (insisting that the political interests of employees and local activists take precedence over those of shareholders by alienating revenue-generating customers) is the source of much of the destruction of its value over the past year. Čapek’s dismissal represents the most vocal victim of the backlash from shareholders over years of wasteful management. It is hoped that this episode will prove to be symbolic, only the first of many such battles between corporate political managers and shareholders.