Hollywood loves a dramatic story. Disney stock soared 10% on the news the board made a tough, unexpected, and dramatic change of top leadership. Having been in personal contact through the succession, up until this weekend with both returned Bob Iger and fired CEO Bob Chapek, I am certain that the board’s move was a surprise to them, as well as to other company insiders and to the public.
The drama behind the removal of Disney's chief executive and replacement by his mentor Bob Iger has been portrayed as a saga unique to Hollywood, right out of a script from TV hits such as “Succession” or “Game of Thrones.” However, the board’s sudden action was not an impulsive showbiz reflex.
I studied this very type of leadership transition decades ago in my book The Hero’s Farewell where I labeled this type of exit that of “the general.”
A returning general brings opportunities and perils–but that is not unique to media businesses. The allied success in WWII was a triumph of returning-general types from mothballed retirement back into active service. The callbacks to duty of Generals McArthur, Patton, Montgomery, and De Gaulle and retired statesmen like Winston Churchill provided confidence and wisdom as they hit the ground running in a crisis.
In the corporate world, the returns of Steve Jobs, Michael Dell, Larry Page, and Howard Schultz led to major performance rebounds and the revitalization of a languishing culture. Ironically, a successful leader has more legitimacy to make sharp departures from their own past strategic legacy than their struggling successors.
These moves don’t always work. CBS’s legendary founder William Paley infamously maneuvered his loyal board through the sequential removal of four of his promising successors, ultimately leading to the sale of his media empire. After his reluctant retirement from ITT, Harold Geneen actively undermined his successors who earnestly tried to unwind the faltering unwieldy conglomerate he created which included telecom, cable, pumps, Cannon appliances, Sheraton hotels, Rayonier forest products, Continental Baking, Avis car rentals, book publishing, Scott lawn products, and the Hartford Insurance.
Similarly, a year after Twitter founder Jack Dorsey returned to office, the stock crashed more than 60%–and he later encouraged Elon Musk to oust a successor. Charles Schwab pulled the rug from under successors at his brokerage and Yahoo’s Jerry Yang’s return to office failed to revive his once maverick social media enterprise.
The “generals” who succeeded were driven by a mission of restoring their enterprises to greatness rather than by personal grandiosity.
By these guidelines, the prospects of Disney’s leadership change are encouraging. Iger’s failed successor stepped in during the perfect storm of adverse conditions due to the pandemic, record late-season Florida hurricanes, an inflationary economy, a cooling advertiser sentiment, and viewer streaming content fatigue. While Chapek valiantly navigated these headwinds, his chronic overcontrolled style caused acute self-inflicted wounds which led to his ouster. I can confidently say that there wasn’t any sabotage by Iger, who was happily engaged in new adventures.
Chapek’s instinct to overly centralize P&L discretion during a crisis paralyzed and confused the Disney culture–a universe of creative semi-autonomous planets. His surprise decision to stream new films early has eroded box office bonus deals for A-list stars. Chapek then openly attacked A-list stars like Scarlett Johansen as “greedy” over this legitimate concern. He dismissed competent admired top lieutenants who were viewed as threats.
The paradoxical alienation of both civil rights advocates and Gov. Ron Desantis by failing to sign along with 130 other Florida employers a statement of support for LGBTQ rights then reversing course was avoidable. Chapek’s handling of delicate relationships with China was inelegant.
However, it was more acute problems that triggered the board’s action over the weekend: missing top and bottom-line expectations in earnings announcements, a stunning $1.5 billion loss in consumer marketing and streaming, an oddly atonal affect in analyst/investor reports about this news, and the disconnected delayed announcement of hiring freezes and layoffs reactively two days later.
These developments took all external and internal constituencies by surprise, leading to a loss of confidence in Chapek’s leadership. A palace revolt broke out, with top lieutenants going to the Disney board armed with the arguments of Chapek’s industry media and analyst critics.
Iger’s first moves reverse some of these leadership errors. He set a deadline of a two-year interim tour of duty to rebuild enthusiasm and help the board surface a permanent successor who can reach out to all major constituencies. On day two, he dismissed the Chapek deputy who had become a bureaucratic power hoarder, and asked three revered top lieutenants to set up the process of returning much-needed entrepreneurial discretion of key business leaders. This immediately prompted enthusiastic speculation about these three officers as possible successor candidates.
More broadly, Iger brings the luster of competence, confidence, and vision. In his last year as CEO, Disney dominated the global box office with $11 billion in ticket sales by delivering seven of the Top 10 grossing movies that year: Avengers: Endgame, The Lion King, Toy Story 4, Frozen II, Captain Marvel, Star Wars: Episode IX–The Rise of Skywalker, and Aladdin.
Under Iger, Disney was responsible for 11 of the 12 biggest box office openings of all time. Iger engineered the greatest string of acquisitions in the history of the media industry by successfully buying–and integrating–the creative engines of Marvel, Pixar, and Lucasfilm, all while reviving Disney’s own legendary studio and theme parks. His purchase of 21st Century Fox reshaped the industry and his Disney-plus direct distribution strategy has blunted threats from Netflix and Amazon.
Disney’s stock recently traded at an all-time high of $180 a share, up from $24 when Iger took the reins in 2005. The company’s market cap increased by $76 billion in the last month alone.
Total shareholder return during Iger’s tenure was 600%, compared to 217% for the S&P 500. Disney added more than 70,000 jobs in that time period.
When entertainment and sports celebrities reverted to attention-seeking bigoted taunts that tied employers in knots, Iger showed that he has the backbone to fortify Disney’s moral character when challenged.
In his penultimate year on the job, he quickly, confidently canceled a number-one-rated ABC TV sitcom, when its star, Roseanne Barr, launched a cruel racial tirade on Twitter. Iger moved decisively to protect Disney’s reputation, given the corrosive impact on audiences, advertisers, and cast members.
This was just one of many times where Iger was not afraid of being called “woke” for being awake to the true character of leadership.
The only disappointment from Iger’s CEO peers I encountered this week was from those who were afraid that this timing might complicate a possible candidacy for “public office” in 2024.
Sure, the outlook is tougher than when Iger first left Disney, but as the Roman philosopher Lucius Anneus Seneca observed, “Brave leaders rejoice in adversity just as brave soldiers triumph in war.”
Jeffrey Sonnenfeld is the Lester Crown Professor in Management Practice and Senior Associate Dean at Yale School of Management.
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