Bob Iger, Walt Disney Co.’s chief executive officer for more than a decade, agreed to a contract extension that will keep him atop the world’s largest entertainment company until July 2019.
Disney, based in Burbank, California, announced the extension in a statement Thursday. Iger, 66, had a contract running through June 2018. His annual salary will remain unchanged, but he’ll get $5 million for agreeing to the new pact.
The agreement settles who will run the film, TV and theme-park giant for the immediate future and gives Iger time to address problems at Disney’s most-profitable business, the media networks led by ESPN. The company has struggled to find a potential successor to its long-serving chairman and CEO. Tom Staggs, who was viewed as a potential heir, stepped down from his role as chief operating officer last May.
“It’s good for Disney shareholders,” said Laura Martin, an analyst at Needham & Co. who has a “hold” rating on the stock. “They don’t have an obvious successor. They need Bob Iger so shareholders can have an extra year of certainty.”
The shares rose less than 1 percent to $112.43 at 1:45 p.m. in New York. They had gained 15 percent in the past year through Wednesday.
Disney has been grappling with succession issues during a particularly fraught time for its biggest business, media networks. Its ESPN and Disney Channel cable channels have lost subscribers as viewers gravitated to new online viewing options. Theme parks and the company’s film studio have picked up the slack, but Iger has said 2017 will be an anomaly for the company with sluggish profit growth.
Iger received $43.9 million in compensation in fiscal 2016, a 2.3 percent decline from the prior year. He’s in line to receive a $60 million bonus in fiscal 2018 if the company achieves its targeted growth in operating income.
The one-year extension may indicate Iger is “probably ready to move on,” according to Richard “Trip” Miller, managing partner of Memphis, Tennessee-based Gullane Capital Partners, who says he’s been a Disney investor since 2002. Miller said the two years Disney’s CEO has left probably indicate there are candidates the company is considering for his replacement.
“Probably they’ve got a better pipeline of prospects than the Street was aware of,” Miller said.
Disney reported record sales and profit in the fiscal year ended Oct. 1., boosted by film releases including “Star Wars: The Force Awakens” and growth in its theme-park, film and consumer-products businesses. The company has projected modest earnings-per-share growth in fiscal 2017, citing fewer movies scheduled for release and an 8 percent jump in cable TV programming costs due to a new contract with the National Basketball Association.
Results at ESPN dragged down sales and profit in the latest quarter. Disney announced a $1 billion investment in BamTech, the video streaming arm of Major League Baseball last year, and plans to debut an online-only, subscription-based version of ESPN in 2017.
Iger holds the most powerful job in entertainment, overseeing world famous theme parks, Hollywood’s most profitable film studio and the most valuable cable network in ESPN. Brands he’s acquired over his 12 years as CEO, including Pixar, Marvel and Star Wars, generate billions of dollars a year in movie ticket sales, park admissions and merchandise revenue. Disney shares have returned 448 percent since Iger took over as CEO in September 2005 compared 144 percent for the Standard & Poor’s 500 stock index.
Disney’s CEO has had his scheduled retirement delayed three times. As of November, the company hadn’t hired an executive search firm, Bloomberg reported at the time. The positions of president and chief operating officer have been vacant since Staggs’s departure, meaning there’s no clear No. 2 who could step up to the top post if asked.
The board continues to conduct a “robust process of identifying a successor and ensuring a smooth transition,” Orin C. Smith, Disney’s independent lead director, said in the statement announcing the contract extension.
Iger will now likely be around to see the opening of “Star Wars” lands at the company’s resorts in Orlando, Florida, and Southern California. Disney is also on schedule to open an “Avatar” attraction at its Animal Kingdom park in Florida on May 27. Iger has said the company’s new Shanghai resort has welcomed 7 million guests since it opened and would likely top 10 million in its first year.
©2017 Bloomberg L.P.