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Dis­ney CEO has some new heights to scale to earn his pay

Iger’s new com­pen­sa­tion pack­age de­pends a lot on what he does on stream­ing ser­vices

- BY TARA LACHAPELLE Movies · Investing · Business · The Walt Disney Company · Walt Disney · Walt Disney Parks and Resorts · Magic Kingdom · United States of America · Netflix · Star Wars Episode VII: The Force Awakens · Star Wars · 21st Century Fox Film Corporation · Twentieth Century Fox Film Company Ltd. · Robert Iger · Disney+

Walt Dis­ney Co. needs to look like the Magic King­dom again if Bob Iger wants to get paid like a king. Ear­lier this year, Dis­ney share­hold­ers baulked at an ex­or­bi­tant pay pack­age that was awarded to the CEO amid the stock’s mid­dling per­for­mance.

It was a mean­ing­ful state­ment given that Iger is one of Amer­ica’s most ad­mired cor­po­rate lead­ers; only a tiny uni­verse of S&P 500 com­pa­nies lose such votes each year. But in Dis­ney’s case, it was ef­fec­tive. In a fil­ing, Dis­ney tweaked part of Iger’s con­tract. He is now el­i­gi­ble for up to 1.17 mil­lion shares — worth about $135 mil­lion cur­rently — if Dis­ney beats at least 75 per cent of the S&P 500 In­dex in the four years through De­cem­ber 2021. If Dis­ney per­forms in the lower quar­tile of the in­dex, Iger will re­ceive noth­ing. (He’ll still make his $3.5 mil­lion salary, bonus and other eq­uity awards.)

But does Iger re­ally be­lieve a legacy me­dia com­pany can beat the stock mar­ket by such a wide mar­gin? At one time, it was a given that Dis­ney would.

How­ever, Dis­ney has be­come more vul­ner­a­ble as Net­flix Inc and a del­uge of other stream­ing ser­vices threaten the in­dus­try’s two big­gest streams of rev­enue: ad­ver­tis­ing and cable-pack­age fees. Dis­ney’s stock gains didn’t ex­ceed even half the S&P 500 over the last four years, and that in­cludes a pe­riod in which it was boosted by Star Wars: The Force Awak­ens, the high­est-gross­ing movie do­mes­ti­cally of all time.

Just three years away from re­tire­ment, Iger is in the midst of his largest ac­qui­si­tion yet, an $85 bil­lion deal for 21st Cen­tury Fox Inc’s cable-en­ter­tain­ment and film as­sets. The in­te­gra­tion will likely be messier than Dis­ney’s past pur­chases. The Fox trans­ac­tion is part of Dis­ney’s new stream­ing strat­egy, which will could lead to strife within the em­pire.

Tough choices will be made as far as which new con­tent should be re­served for the Dis­ney+ stream­ing ser­vice, po­ten­tially in­stead of re­leas­ing it to the­atres or home video or on its cable net­works. The com­pany may suf­fer a $1.4 bil­lion hit to rev­enue in fis­cal 2020.

Given his clear de­sire to con­tinue run­ning Dis­ney, along with the speed bumps the stock has hit in re­cent years and the com­pany’s re­duced vis­i­bil­ity, is such a gen­er­ous pay pack­age jus­ti­fied? No.

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