Disney admits the truth

Disney stands as the epitome of marquee American brands that have been devalued by pandering to unpopular political causes and repeated attempts at social engineering.

In interviews with the media, Disney’s CEO tried to spin the underperformance of the company stock as being due to factors other than using shareholder resources to push social causes. “Too many Marvel sequels,” said Bob Iger, speaking to the media. Except it’s not the Marvel sequels that have been the big losers. Consider that it was Lightyear, the Toy Story prequel, gave us Disney’s first same-sex kiss. Toy Story is a nostalgia franchise. If a same-sex kiss belongs anywhere in Disney, it isn’t there. It flopped. So did Elemental, which they’d hoped would become a franchise. Its “breakthrough” was that it was Disney’s first nonbinary character, complete with grammatically incorrect pronouns. Unfortunately, they/them lost his/her shareholders a lot of money.

The Marvels’ only superpower is the cast’s ability to take on the appearance of the DEI page of the corporate website. Unlike Captain Marvel herself, the movie didn’t fly. It’s not that diversity doesn’t work. The new animated Spiderman franchise has a multiethnic cast and has done quite well. The story is good. Identity quotas aren’t the drivers.

Iger can try to deflect criticism onto others when talking to the press, but it’s an entirely different matter when talking to the Securities and Exchange Commission, the publicly traded company’s primary federal regulator. Every year, publicly traded companies are required to file something called a “10-k” with the SEC. Misleading the SEC is serious business, so Disney told the truth.

Disney offers a perfunctory stab at blaming economic conditions: “Declines in economic conditions, such as recession, economic downturn, and/or inflationary conditions … adversely affect demand and/or expenses for one or more of our businesses.” But this leaves unexplained why Disney this year has lagged behind its widely accepted benchmarks, Netflix, Warner Brothers, and Comcast. For example, the lag is severe compared to Netflix: 58 percent return compared to less than 7 percent return. All those companies live in the same economic climate, so the economy at large is not to blame for Disney’s worst-in-class performance.

Eventually, Disney’s statement fesses up in its required disclosure. It turns out that a company that pushes anti-bourgeois social revolutions to middle America might “face risks relating to misalignment with public and consumer tastes and preferences for entertainment, travel and consumer product.” And it’s not just a matter of politics in the product, it’s also a matter of politics unrelated to the product, like betting the brand on the “right” for kindergarteners to get an education in gender fluidity.

The company admits that “consumers’ perceptions of our position on matters of public interest, including our efforts to achieve certain of our environmental and social goals, often differ widely and present risks to our reputation and brands.” Disney’s fiduciary duty has nothing to do with “social goals” and everything to do with the financial interests of its owners, the same owners who are behind where they would have been if they had invested in Disney’s competitors instead of Disney itself.

Shareholders are not taking all of this in stride. Nelson Peltz, an activist investor, is launching a proxy contest, which is an attempt to nominate and elect board members who will shake things up. But Disney’s appetite for social revolutions apparently does not apply to its own board. Sure, shake up things in the nascent sexual personae of 5-year-olds, recruit warrior superheroines to slay the patriarchy, but don’t touch our entrenched corporate board. Accordingly, the company just unilaterally changed its bylaws to weaken the rights of shareholders.

The changes are somewhat technical, but they amount to multiplying the paperwork that dissident nominees would have to file, shortening their time to file it, and requiring the nominees to go through an expensive process of contacting more than two-thirds of shareholders about their nomination before they can get on the ballot. Incumbent board members will have a much easier time of it.

Disney (ahem) prides itself on its ESG bona fides, but apparently, the G (governance) gets swept aside like the Old Republic when the emperor is displeased by the votes. When it comes to long-term cultural impact, Disney’s election next year will be yet another vote that will come with great and lasting consequences.