Los Angeles Times

Iger staying at Disney as successor hunt drags on

CEO will remain at the helm of the company into ’19

- By Daniel Miller

Walt Disney Co. Chairman and Chief Executive Robert Iger has extended his contract by one year, underscori­ng the challenges the company’s board of directors has faced in finding a successor to lead Hollywood’s iconic entertainm­ent giant.

Iger, 66, previously was expected to leave the company at the end of June 2018. His new deal ends July 2, 2019. The extension, Iger’s third since he became CEO in 2005, had been widely expected. It gives Disney’s board more time to search for a successor — a process that has been closely watched by investors who’ve expressed concern over the apparent lack of progress on the issue.

With few obvious internal candidates, the board seems increasing­ly likely to look outside Disney for its next CEO. Replacing Iger will not be a simple task: The company has enjoyed an extended run of success under Iger, and seen its stock price more than quadruple on his watch.

In an appearance just hours after the contract news was announced Thursday, Iger said he was “serious this time around” about this being his last extension, and acknowledg­ed the complexiti­es of finding his successor.

“Succession is a complicate­d thing and we felt, meaning the board and I, [that] we could use more time to not only spend on succession but to create a better transition so we mutually agreed to add another year,” Iger said at the SCALE technology and entertainm­ent conference, which was hosted by the

USC Marshall and Annenberg schools. He was interviewe­d by his wife, Willow Bay, the incoming dean of the USC Annenberg School for Communicat­ion and Journalism.

Wall Street did not react strongly to Iger’s new pact — shares of Disney rose 16 cents to $112.24 — possibly because the extension was considered a fait accompli among investors. But analysts were neverthele­ss happy about the decision.

“Investors will be pretty pleased with this,” said analyst Robin Diedrich of EdThe ward Jones Research. “Shareholde­rs — and we — would agree that he is doing a pretty good job, so it is nice to see that this is confirmed that he will stay on.”

Disney has been transforme­d by three multibilli­on-dollar acquisitio­ns orchestrat­ed by Iger: Pixar Animation Studios in 2006, Marvel Entertainm­ent in 2009 and Lucasfilm in 2012. Those deals have provided the company with lucrative franchises such as “Star Wars” and “The Avengers,” which have been pumped through its diverse array of businesses. Burbank-based Disney’s stock is up nearly 8% this year.

Until February, Iger had been firm in saying he would leave Disney when his contract expired in 2018. But during a conference call with analysts last month he said that he was “open” to extending his deal — if the board deemed that the best course of action. Disney has no mandatory retirement age for the CEO role, though board members have to retire after they turn 74.

“It is obvious that the company and its shareholde­rs will be best served by [Iger’s] continued leadership as the board conducts the robust process of identifyin­g a successor and ensuring a smooth transition,” Orin C. Smith, independen­t lead director of the board, said in a statement.

Thomas Staggs, Iger’s former heir apparent, left Disney’s No. 2 post last year. Staggs’ departure, which came after Disney’s board privately expressed a lack of confidence in him, threw Disney’s carefully orchestrat­ed succession plans into question.

Replacing Iger will be tough in part because of the job descriptio­n. Disney has a unique culture and far-flung businesses — including superhero movies and cruise ships — that any future CEO would have to fully grasp.

company’s next leader would inherit a largely different set of challenges from those Iger has tackled. In particular, major changes are afoot in the television industry.

Disney’s cable television business has been hurt by cord-cutting and the slimmed-down TV packages offered by service providers.

ESPN, the crown jewel of Disney’s TV unit, has lost more than 9 million subscriber­s since 2013, according to Nielsen data, and this month it confirmed plans to lay off a number of on-air personalit­ies.

Recently, Disney has made moves designed to strengthen its media operation, including a $1-billion investment last year in video streaming company BamTech.

“You probably need someone who is more newmedia oriented, so it probably needs to be somebody outside the company,” Michael Alpert, portfolio manager at Stralem & Co., which owns 269,000 shares of Disney, said this month.

“It’s not just the cable business, theme parks business anymore,” he said. “Somebody has to have a grip on that.”

Disney’s board has said very little publicly about its effort to find a replacemen­t for Iger.

When Staggs’ departure was announced last year, the board said in a statement that it would “broaden the scope of its succession planning process to identify and evaluate a robust slate of candidates for considerat­ion.”

With Staggs now gone, Diedrich said “the alternativ­es at this point are not clear.” She noted that “investors are not comfortabl­e with uncertaint­y” — although it appears unavoidabl­e in this situation.

“It does seem that with the change from Staggs ... that maybe there is more of an appetite for an external candidate,” Diedrich said. “But I wouldn’t rule out an internal candidate either.”

Even before Staggs’ departure, succession planning at Disney has been rocky at times. The company endured a protracted handoff from former CEO Michael Eisner to Iger in 2005.

Under terms of his contract extension, Iger’s compensati­on will be determined using the same formulatio­n as before. In fiscal 2016, Iger’s total compensati­on was $43.9 million. His new pact calls for him to receive a $5-million bonus if he remains CEO until July 2019.

As part of the extension, Iger will remain as a consultant to Disney for three years after his CEO term ends. During the consulting period, he will receive $2 million for each of the first two years, and $1 million in the final year.

 ?? Jesse Grant Getty Images ?? ROBERT IGER previously was expected to leave Disney at the end of June 2018. The new deal — his third contract extension — ends July 2, 2019. Iger said he was “serious this time around” about this being his last extension.
Jesse Grant Getty Images ROBERT IGER previously was expected to leave Disney at the end of June 2018. The new deal — his third contract extension — ends July 2, 2019. Iger said he was “serious this time around” about this being his last extension.
 ?? David Roark ?? DISNEY has a unique culture and far-f lung businesses, including superhero movies and cruise ships, that a future CEO would have to fully grasp. Above, a Disney ship in the Bahamas.
David Roark DISNEY has a unique culture and far-f lung businesses, including superhero movies and cruise ships, that a future CEO would have to fully grasp. Above, a Disney ship in the Bahamas.
 ?? David Swanson ?? WITH FEW obvious internal candidates, the board seems increasing­ly likely to look outside Disney for its next CEO. Above, at Shanghai Disneyland last year.
David Swanson WITH FEW obvious internal candidates, the board seems increasing­ly likely to look outside Disney for its next CEO. Above, at Shanghai Disneyland last year.

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