The Walt Disney Co. (Tii:DIS), one of the largest media companies in the world with a market value of more than $200 billion, successfully fought a proxy battle initiated by Nelson Peltz, a billionaire activist investor. The matter was settled in April.

Since Walt and Roy Disney founded Disney Brothers Studios in 1923, seven people have led the powerful conglomerate. Current CEO Robert Iger retired at the end of 2020 and returned to the company’s top spot in 2022 when the succession plan for a new CEO was unsuccessful. The proxy fight was launched shortly after the power transfer between Iger and Bob Chapek.

Reviewing the workings of a board of directors can provide some insight into understanding what happened at Disney: A board of directors is a company's governing body, whose members are elected by individual shareholders (in the case of public companies) to build strategy, oversee management, assess potential risks, and protect the interests of shareholders and stakeholders. This includes examining more closely risks that pertain to key economic and market projections that inform the company's business plans and growth strategies.

A proxy fight happens when retail shareholders — or in this case, Nelson Peltz — join forces to try to pressure a company’s management or board of directors to make changes using corporate governance rules. This pressure is typically applied when enough shareholder proxy votes are gathered to win a vote for corporate-level change. In some situations, individual shareholders can appeal to the board directly to express their complaints and work toward a specific decision by management. Suppose board members are disinclined to hear grievances. In that case, shareholders may try to persuade other shareholders to let them use their proxy votes in a campaign to replace unyielding board members with candidates more receptive to implementing the shareholders' proposed changes. When this happens, the shareholders and the target company typically use a variety of solicitation methods to influence votes for replacement board members.

Peltz has a history of challenging the governance of large companies. As co-founder of the investment firm Trian Partners, he is worth approximately $1.4 billion and has successfully acquired large stakes in companies like Procter & Gamble (Tii:PG) and Mondelez International (Tii:MDLZ). He frequently competes for a seat on the boards of companies to wield more direct influence. In the Disney case, he was looking for two seats: one for himself and the other for former Marvel Chairman Ike Perlmutter.

One of Peltz’s largest grievances against Iger was what he termed a “year-long failure” to properly identify and prepare Chapek, his replacement. Another issue Peltz brought to the proxy fight was mentioned in a Forbes article that referred to Disney leadership’s “lack of urgency to address its poor earnings growth and return on investment.” It cited Disney’s nearly 50% decline in earnings per share from fiscal year 2018 to 2023 and its 10%, five-year return on investment. In April 2024, Disney released earnings that showed its most profitable quarter since 2019 and announced its plan to reinstate dividends for the first time since early 2020.

In the Disney proxy fight, both sides utilized large resources to fund their campaigns. Peltz’s Trian Partners reportedly spent about $25 million, while Disney spent about $40 million. Disney was able to fend off Peltz’s campaign, with 75% of shareholders backing Disney’s board candidates. A win of this size emphasizes the role of individual shareholders' votes.

Public companies like Disney have much to gain from tapping into the power of their retail shareholders. Partnering with TiiCKER helps companies connect and engage with their individual investors, a market of people who are often the most loyal and most overlooked fans of a brand. Together with shareholder loyalty expert TiiCKER, public companies can better connect with their investors as allies, especially when weathering something like a proxy battle.

The scrutiny of a company’s choices, history, and performance that occurs when an activist investor challenges leadership can have lasting effects. Some of the choices made in Disney’s defensive maneuvers may turn out to have a lasting positive impact on the company’s future growth trajectory.