Latest / Boardroom Conversations with Fexingo: CEOs, Strategy, and Corporate Leadership Explained / How the Disney Board Handled the Succession Crisis
Transcript
- Lucas: So there's this moment in 2020, February, and Disney's board has just announced Bob Chapek as the new CEO. Bob Iger steps back into the chairman role. Everyone thinks it's a smooth, planned transition. And then, two years later, they fire Chapek and bring Iger back. What does that say about how boards handle succession? Luna: It says something like 'not great,' right? But let's be fair, they had a plan. It just fell apart in public. Lucas: Exactly. And that's what I want to drill into. Because the Disney board is full of heavy hitters, and they still fumbled this. So the question is: why? And what can other boards learn from it? Luna: Before we go deep, quick honest thing. This show is possible because a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo. That's what funds these episodes, keeps them ad-free. No pressure, just if it's been useful to you. Lucas: Yeah, we don't have ads, so it's listener support that keeps the lights on. Appreciate anyone who does. Now, back to Disney. Lucas: So let's set the scene. February 2020, Disney's at a high point. They've got the streaming launch coming, parks are booming, the stock's near all-time highs. Iger's been CEO for fifteen years, and he's the architect of the modern Disney–Pixar, Marvel, Star Wars, the whole thing. Luna: And they announce Chapek, the parks head, as the new CEO. That felt like a bit of a surprise at the time. I mean, everyone thought Kevin Mayer, the streaming guy, was the heir apparent. Lucas: Right. And that's the first red flag. The board chose a safe pair of hands who wasn't the obvious strategic choice. Chapek ran parks, which is a hugely important business, but it's not the future in the way streaming was. So you've got a board picking someone who's more operational than visionary, and they did it without much public explanation. Luna: But they had a plan, right? Iger was staying on as chairman to mentor Chapek. That seemed like a deliberate move to ease the transition. Lucas: It did. But here's where it gets tricky. Iger didn't really step away. He was still in the office, still on calls with talent, still the public face of Disney. And Chapek had to operate in that shadow. There's a famous story where Chapek learned about a major executive departure from the news, not from Iger. That's a governance nightmare. Luna: And then the pandemic hits, like a month later. So Chapek's thrown into the deep end, trying to manage park closures, Disney Plus growth, and a board that's not fully behind him. Lucas: Exactly. So the board's plan was already fragile, and COVID broke it. Chapek had to make tough calls, like the reopening of parks and the vaccine requirements, and he didn't always communicate them well. He was seen as too corporate, too focused on cfo style metrics, and not enough on the creative side. Luna: And the creative side is kind of Disney's whole thing. He also got into the mess with Scarlett Johansson over Black Widow, which made him look like he was nickel and diming talent. Lucas: That was a legal battle over streaming residuals. And it became a symbol of Chapek's style. But the real problem wasn't just Chapek. It was the board. They kept changing the rules. They extended his contract in June 2022, gave him a vote of confidence. Then, a few months later, they fired him. That whiplash destroyed their credibility. Luna: So what was the board thinking? Why did they flip so quickly? Lucas: I think there were two forces. One, the stock was down. Disney had gone from a high of around two hundred dollars in 2021 to under ninety by the fall of 2022. That's a massive drop. And two, Nelson Peltz's Trian Fund was circling, looking for board seats, pushing for changes. The board panicked. They realized Chapek wasn't going to be able to turn things around, and they needed a dramatic move to restore investor confidence. Luna: And there's only one person who could do that–Bob Iger. So they basically had to reverse their decision and beg him to come back. Lucas: Which is unprecedented in a company this size. I mean, bringing back a former CEO happens, but usually it's a short-term fix. Here, the board essentially admitted they made a mistake in 2020 and tried to undo it. That's a colossal governance failure. Luna: But Iger did come back, and he did stabilize things. He cut costs, restructured, and the stock recovered somewhat. So maybe it ended up okay? Lucas: In the short term, yes. But the lasting lesson is about the board's process. They had a succession plan, but it was clearly flawed. They didn't groom the right person, they didn't support Chapek, they didn't manage the transition. And they let external pressure force their hand. That's not how you want to run a company. Luna: So what should a board actually do when it's planning for a CEO transition? I'm thinking about the lessons for any company, not just Disney. Lucas: Right. The first thing is to have a real pipeline. That means identifying internal candidates years in advance, giving them multiple roles, and testing them under fire. The board should be meeting with potential successors regularly, not just when the CEO announces they're leaving. Luna: And they need to be honest about the CEO's own feelings. Iger was famously not ready to leave. He kept coming back, even after his book tour said he was done. The board should have forced a clean break, not let him stay on as chairman and hover. Lucas: Exactly. That's a big one. When the outgoing CEO remains on the board, it creates a shadow CEO dynamic. It undermines the new person. The board has to be willing to say, 'You're out, and you don't get a seat at the table.' Luna: And what about the criteria? Should they match the company's strategy? Chapek was an operator, but Disney needed a strategist. Lucas: That's the core tension. The board thought they needed someone to execute Iger's vision, and Chapek could do that. But the strategy was changing, especially with streaming, and they didn't adapt the profile. They were looking for a pilot to keep the plane on course, but they needed someone to redraw the flight plan. Luna: So how do you avoid that? How do you make sure you pick the right person? Lucas: You have to have a deep, ongoing debate about what the company will look like in five years. And you have to involve the board, not just the CEO. Too often, the CEO picks their successor, and the board just rubber-stamps it. Disney's board did that. Iger chose Chapek, and the board went along. That's a failure of oversight. Luna: And then when things go wrong, the board panics. They should have been monitoring Chapek's performance more objectively, with milestones and feedback, rather than just waiting for the stock to crash. Lucas: Right. And there's a role for outside consultants too. Some boards use an external firm to assess candidates, which can remove some of the bias. Disney might have benefited from that. But ultimately, it's about the board taking ownership of the process. Luna: Let's talk about the activist investor angle. Peltz came in with a clear agenda. How should a board handle that pressure during a succession crisis? Lucas: Well, you don't want to make decisions just because an activist is breathing down your neck. But you should listen. Activists often have valid points about governance and performance. The key is to engage when appropriate, but not let them dictate strategy. Disney's board basically caved to Peltz's pressure by bringing Iger back. That might have been the right call, but it was reactive, not proactive. Luna: So what's the ideal scenario? If you're a board and you see the CEO is struggling, what do you do? Lucas: You have a plan in place. You have a bench of potential candidates, you have clear performance metrics, and you have a timeline. If the CEO isn't meeting expectations, you have a conversation early, give them a chance to improve, and if they don't, you make a change before it becomes a crisis. That's what separates good governance from bad. Luna: And you don't wait until the stock has fallen fifty percent and an activist is at the door. Lucas: Exactly. By then, you've lost credibility and you're just scrambling. I think the Disney case is a great teaching example because it's so public and so dramatic. But these patterns play out in smaller companies all the time. Founders who don't want to let go, boards that don't want to upset anyone, and then the whole thing collapses. Luna: So if there's one takeaway for our listeners, what should it be? Lucas: I'd say: succession isn't an event, it's a process. It's something you're doing every single day, not something you do when the CEO hands in their notice. The board's job is to make sure the company survives leadership changes without missing a beat. Disney didn't do that, and they're still dealing with the fallout. Luna: And I think it's also about humility. The board has to be willing to admit they don't know everything, that they might need to change their approach. Disney's board didn't do that until it was almost too late. Lucas: Yeah. And I think Iger's return is a reminder that sometimes the best CEO for the next phase is the one you just had. But that's a rare situation, and it shouldn't be the default plan. The board should have built a system that didn't need a deus ex machina. Luna: So what's next for Disney? Do you think they've actually fixed their succession planning, or is this a recurring problem? Lucas: Iger has said he's leaving again, but he's said that before. The board has been more deliberate this time, I think. They've been grooming a few internal candidates, and they've been more transparent about the process. But we'll see. The next few years will tell if they learned the lesson. Luna: And I guess that's the real test: what happens when Iger actually leaves, and this time he doesn't come back? Lucas: Exactly. That's the question. And it's a question every board with a strong CEO will eventually face. The ones that handle it well will be the ones that think about it before they have to.