Like many companies, Walt Disney does its best to avoid controversy. But in winning over investors last week, with plans to cut costs and restore its dividend, Disney may have upset investors who consider the company a leader in ESG, or environmental, social and governance investing.
In his first earnings call since taking back the reins at Disney (ticker: DIS), CEO Bob Iger promised $5.5 billion in cost cuts, saying that to achieve that goal, the company would “retrain its employees.” will reduce the number of jobs by about 7,000.” He also said that the company expects to restore its dividend by the end of the year. The cuts are not expected to affect employees in hourly front-line roles at the theme parks.
Analysts applauded and markets loved the initiative, sending Disney stock up more than 8% in after-hours trading. But the changes also exposed criticism of the company for prioritizing one constituency—the shareholders—at the expense of another: its 22,000 employees around the world.
Iger is one of the highest paid CEOs in Hollywood. He will receive an annual base salary of $1 million and a long-term incentive award with a target value of $25 million — highlighting another controversy: a widening gap between CEO and employee pay.
“The signal Disney is sending with the layoffs is that they are seeking to be more efficient, but at the same time they have a highly paid CEO. This contrast of high CEO pay versus layoffs is not only controversial, but Workers are a slap in the face,” says R. Paul Herman, founder and CEO of HIP Investor, a California-based sustainability ratings, data and analytics provider. (HIP stands for “Human Impact Plus Profit.”)
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Some say the prospect of pursuing a cost-cutting program alongside an increased dividend is strange from an ESG perspective, especially when coupled with higher CEO pay, a favorite target of “say-on-pay” shareholder proposals. .
Herman says Disney’s CEO-to-worker pay ratio was 644 to 1 as of the 2022 proxy statement, which is above average among its peers. For example, Netflix (NFLX) is 202 to 1, and Paramount Global (PARA) — which includes CBS and Viacom — is 212 to 1.
However, Iger is not the highest paid CEO in Hollywood. That title could go to Warner Bros. Discovery (WBD) chief David Zaslav, whose total compensation of $246.6 million in 2021 would have put Warner CEO to worker-pay ratio 2,972 to 1.
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Disney scores well in other areas of corporate social leadership. Herman points out that Disney is a leader in gender diversity for employees and “supports the LGBTQ community, particularly in Florida’s ‘don’t say gay’ controversy where Disney ultimately supports employees.”
Compared to media peers, Disney scored 98 out of 100 on a scale that balances “everything from people to the planet,” Herman says. “He is a leader in his industry.” Against a wider universe of 11,000 companies globally, however, Disney’s HIP rating is 61. Its CEO-to-worker-pay ratio brings down its rating, Herman says.
Others with ESG scores also rank Disney highly. MSCI (MSCI), the largest ESG ratings firm, assigns Disney an “A” or “Average” rating among 68 peers in media and entertainment, rating the company a “leader” on corporate governance, human capital development, and privacy and data protection Believes. ,
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Disney declined to comment, but referred Barron’s remarks to comments made by Iger on the earnings call. “While it is necessary to address the challenges we face today, I do not make this decision lightly,” he said, adding, “I am conscious of the personal impact of these changes. “
An anti-ESG activist welcomed Disney’s focus on shareholders. Vivek Ramaswamy, co-founder and executive chairman of Strive Asset Management, says tough economic times expose companies like Disney to “quality signaling” when “times are good.”
Whatever the Mouse House does, it seems there’s always a critic in the wings.
Write to Lauren Foster at [email protected]
Source: www.barrons.com
