The Billionaire Beckham-in-Law Vying to Crash Disney’s Board
When Nelson Peltz calls, the world’s most powerful CEOs have reason to grow alarmed.
Wealth and Power Reporter
When the octogenarian billionaire Nelson Peltz calls, perhaps from his New York office—or, if he’s craving the sun, his 44,000-square-foot palace on Palm Beach island—the world’s most powerful CEOs have reason to grow alarmed.
Peltz’s firm, Trian Fund Management, specializes in activist campaigns against companies it believes are underperforming. Industry giants like DuPont, Procter & Gamble, and PepsiCo have all felt the heat.
Peltz described his philosophy simply in 2016: “We’re trying to figure out how we can get sales up and put a lid on expenses.” Sometimes, that means helping show executives the door.
Trian’s latest target: Disney, where Bob Iger returned as CEO in November, less than three years after passing the torch to Bob Chapek. Since last summer,Peltz has been angling for a board seat, but Disney hasn’t complied. As a result, Trian has ratcheted up pressure, launching a website called “Restore the Magic” and vowing to take up the fight directly with other shareholders.
Peltz is demanding a clear succession plan for Iger and is pushing to trim costs. And he is apparently willing to embarrass Iger to gain influence. In a recent public filing, Trian unsubtly noted that Iger wanted to schedule a board meeting at a date that would leave him plenty of time “to sail his yacht off the coast of New Zealand.”
Trian declined to comment. Disney did not respond to an email from The Daily Beast.
Trian, which Peltz cofounded in 2005, oversees about $8 billion in assets under management. “That has enabled them to take on some big game,” said Stephen Bainbridge, a professor at the UCLA School of Law who has extensively researched corporate governance.
“I would say that on the spectrum of hedge fund activists, that Peltz is definitely at the aggressive end,” Bainbridge continued, though he noted that in many cases, Trian has made “changes that were regarded as helpful.”
The trouble is getting executives to listen without a protracted battle, he said, since CEOs are known for “big egos” and “nobody wants what they would regard as a sort of professional rabble-rouser coming in and telling them to change their plans.”
Edward Rock, co-director of the Institute for Corporate Governance & Finance at NYU Law, told The Daily Beast that Trian engages “with companies because they think that they can genuinely make them better.” The aggressive tactics come next.
In 2017, for instance, Peltz commenced a protracted proxy fight against Procter & Gamble for a board seat.
During that clash, “Trian used the media and issued detailed white papers to criticize the performance of P&G’s CEO,” said Szu-yin “Jennifer” Wu, who teaches corporate finance at the University at Buffalo. According to media reports, the proxy battle cost over $100 million, one of “the most expensive in U.S. corporate history.” (Peltz lost the final vote by a thin margin, Procter and Gamble said at the time, but he nonetheless received a seat on the board.)
In another case, Peltz reportedly cautioned Unilever chief Alan Jope against letting brands take political positions, after its subsidiary Ben & Jerry’s announced that its ice cream would not be sold at Israeli settlements in Palestinian territories. (Unilever later moved to prevent the ban from going into effect.)
“I would say that on the spectrum of hedge fund activists, that Peltz is definitely at the aggressive end.”
Trian has similarly sought influence at Wendy’s, in which it invested in 2005, arguing that the restaurant chain had “lost its way after the passing of its founder Dave Thomas.” At DuPont, meanwhile, Trian lobbied in 2014 to break the business up into different segments, a proposal that ultimately failed.
“Peltz has a piratical charm and a velvet glove. But don’t mistake the iron fist. He is relentless in pursuit of his own objective, which is value creation,” the former chairman of Cadbury, who once experienced a Trian pressure campaign, told the Financial Times.
To his critics, Peltz’s tactics prioritize short-term returns over long-term financial health. “They’re in it and then out of it,” Bainbridge said, summarizing the argument against many hedge fund investors. (Trian has said the firm invests in companies for an average length of six years when it receives a board seat, longer than some competitors.)
Rabbi Marvin Hier, Nelson Peltz and Rupert Murdoch attend the annual tribute dinner for the Simon Wiesenthal Center in 2006 in New York City.
Nadya Malenko, an associate professor at the University of Michigan who considers Trian potentially “less hostile” than some rivals, defended the activist industry. “They’re good at streamlining the company and selling the assets that the company does not have a good ability to operate efficiently,” she said.
At Disney, Trian insists it doesn’t want to oust Iger, nor does it intend to break up its assets. Instead, Peltz’s team argues, Disney needs to reduce its “non-core” expenses, peg executive compensation to the business’s target objectives, and improve its approach to acquisitions.
In a letter to Disney’s board on Jan. 8, the firm argued that “Trian investments where Nelson has served on the board have outperformed the S&P 500 by approximately [9 percent] annually during the period of his board involvement.”
Despite his triumphs, in recent years Peltz’s name has more often been associated with his daughter, Nicola, who last spring married the son of soccer legend David Beckham and fashion designer Victoria Beckham. The event took place at Peltz’s Palm Beach estate.
“There’s a certain amount of irony here that a guy who’s a multi-billionaire, and in the corporate world is known and feared… is sort of in the back of a picture with a bunch of Beckhams in it,” said Bainbridge. “It’s kind of funny that way.”
Comments
0 comment