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Thursday, September 22, 2022

10 Key Points from an Anti-Activist Activist Letter to Disney

 by Ray Keating



September 22, 2022


Activist investors like to pen letters to the management of companies in which they are invested. That most certainly is the case with The Walt Disney Company.

Last month, investor Dan Loeb offered Disney a letter with some ideas. This month, Vivek Ramaswamy, who is the executive chairman of Strive Asset Management, penned a letter to Disney CEO Bob Chapek. What’s interesting about the Strive letter is that it amounts to an activist investor arguing against political activism, either left or right, with company resources.


Here are 10 key points from Ramaswamy’s letter (bolded emphasis in original letter):


• “On behalf of our clients, we write to ask your board a fundamental question: how do Disney’s politicized behaviors advance the economic interests of Disney’s stockholders? We believe they do not, and we respectfully suggest that Disney rectify its missteps ahead of next spring’s proxy voting season.”


• “If Disney can avoid being conscripted into political warfare, we believe the company is well positioned for growth.”


• “Over the past year, Disney has become embroiled in political controversies that have unquestionably damaged Disney’s brand. We ask a simple question: what risk-reward calculus justifies taking controversial political positions that risk derailing Disney’s otherwise strong economic prospects by alienating a majority of your customer base?”


• “We respectfully remind you that while you are free to use your own vast personal resources to advance social causes that you favor – Disney shareholders rewarded you this year with a $20 million annual bonus on top of a $2.5 million base salary – your sole purpose in making a corporate donation must be to advance the financial interests of Disney’s stockholders.”


• “We remind Disney’s board it owes a fiduciary duty solely to Disney’s actual owners, not to a minority of its employees, activist organizations, or to large financial institutions who promote one-sided political agendas.”


• “Like Disney’s customers and Americans more generally, Disney’s shareholders are not monolithically progressive. Thus even if these investors wanted their capital to be used for political purposes – and most do not – not all of them would agree with the positions Disney chose to adopt.”


• “And the only way to represent a brighter tomorrow for all of these customers – to be, in your words, “everything to everybody” – is for Disney to focus on delivering an excellent customer experience without repeating the mistakes of its recent past. Disney must make clear that it will no longer take political stances on issues unrelated to its core business operations. The company must make clear that it will hold firm to this promise, and that it will not waver no matter how important a particular social cause is to Disney’s employees or its followers on Twitter.”


• “If Disney continues speaking out on political issues that do not affect its business, it will face even greater pressure to act when they do. And the sides Disney will be expected to take won’t be the ones that are favorable to its business. Disney may be pressured to stop operating its cruise line in the name of environmental concerns – even though its cruise business generates an estimated $1.6 billion per year. The company may be pressured to stop using certain companies in its supply chain based on social issues, even if those suppliers are the best suited to meet Disney’s business needs. The possibilities are endless, yet real.”


• “Once Disney makes clear that it will no longer wade into political controversies, and it abides by that commitment, the company’s failure to speak out in any specific instance will eventually be a non-event – just as it is when Disney meets the financial guidance that it sets for Wall Street analysts meeting its own financial guidance that it sets for analysts. Would-be protestors will learn that their efforts would be better directed elsewhere.”


• The letter concludes with a call for Disney to “not take public positions on political controversies that are unrelated to the company’s core business operations,” to “commit to political nondiscrimination amongst its employees and customers,” and to make “all decisions based on long-term profitability of Disney alone, without regard to social, cultural, or political pressure from employees, activist groups, or other stakeholders.”


This is called business common sense. After all, when a company dives into political controversies that have nothing to do with their business, the potential ills for shareholders – that is, the actual owners of the company – can be substantial.




Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and the Alliance of Saint Michael novels; and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.


The views expressed here are his own – after all, no one else should be held responsible for this stuff, right? Full disclosure: Keating is Disney shareholder.


Two great ways to order Cathedral: An Alliance of Saint Michael Novel, which is Ray’s sixteenth work of fiction, and the first in the Alliance of Saint Michael series. Signed paperbacks here and the Kindle edition here


Two great ways to order Ray Keating’s new nonfiction book – The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks here, and paperbacks, hardcovers and Kindle editions here.  


Get all of Ray Keating Pastor Stephen Grant thrillers and mysteries in paperback and for the Kindle at Amazon.com and signed books at www.RayKeatingOnline.com


Also, check out Ray’s podcasts – the Daily Dose of DisneyFree Enterprise in Three Minutes, and the PRESS CLUB C Podcast.


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