It's been a rough month for Walt Disney (DIS +0.87%) CEO Bob Chapek. March began with the media giant's helmsman under attack by theme park enthusiasts upset about recent revenue-enhancing moves and social rights activists concerned about Disney's failure to take a public stance on the "Don't Say Gay" bill that was working its way through the Florida legislature at the time.
Chapek initially survived with ease. Plans to garner enough retail investor support to boot him from the board at Disney's shareholder meeting earlier this month fell woefully short. Every director received at least 94% of the votes for renewal. Chapek and Disney finally decided to voice their objection to the anti-LGBT classroom bill that was signed into law this week, and somehow things have only gotten worse for Chapek.
Disdain for Chapek that initially began with Disney World and Disneyland passholders venting on social media before spreading to inclusion advocates has gone mainstream. A Hollywood Reporter article on Thursday wonders if Chapek will be removed when his contract comes up early next year. The anti-Chapek contagion is real, but it's not too late for the beleaguered leader to turn things around.
Image source: Disney.
Welcome foolish mortals
Chapek's reluctance to take an initial stance was costly, but his pivot to take a public position proved catastrophic. Chapek made enemies on the left at first by refusing to comment on the controversial bill. When Disney finally got vocal about its opposition to the schoolhouse mandate it made enemies on the right without necessarily appeasing those on the left. Threading the needle didn't work. Employees still staged walkouts, and now Disney stands to lose more ground as it trades blows with Florida's conservative politicians.
Republican lawmakers claim to be discussing repealing the legislation that allows Disney World to have autonomy and score tax breaks in governing over its empire that spans more than 40 square miles in Central Florida. If passholders think that prices are high now, just imagine what will happen if Disney's Reedy Creek Improvement District is dissolved.
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Key Data Points
Disney's plan to maximize per-capita spending at its theme parks -- favoring spendy one-time visitors over frugal regulars -- will shift to an even higher gear if Disney's operating costs catapult as a result of the political fisticuffs. The playbook could change if conservatives threatening to boycott the House of Mouse carry through with their missives, but this only illustrates how taking sides can be a dangerous game for a consumer-facing company.
Chapek is down, but he's not necessarily out. Human rights activists may be upset that it took Chapek so long to come around, but isn't it better to arrive late than not arrive at all? Florida politicos that think they have Disney backed into a corner might be overplaying their hand. Disney is in the process of relocating 2,000 largely high-paying Imagineering and professional jobs from California to Central Florida. If Florida conservatives try to turn up the heat on Disney, there's nothing stopping the media giant from moving those jobs -- and more -- somewhere else. It won't take much for Disney to turn the narrative against the politicians plotting against it around ahead of their own re-election campaigns.
This isn't the only way that Chapek emerges unscathed from this seemingly unescapable entanglement. It's probably a good thing that the anti-Chapek fervor is building to a crescendo right now. The climate could and should be relatively kinder 11 months from now when his current contract expires at the end of February -- if the board waits that long to avoid shelling out a costly severance package. He'll have a few more quarters to grow Disney+ subscribers and build on the record revenue and operating profits at Disney's domestic theme parks in its latest financial update.
There are other scenarios for the bellwether entertainment stock where things don't end badly for Chapek. Other companies could follow Disney's lead, even if Chapek's pivot blew up in his face. Breaking the mold of quiet corporations that silently donate to and lobby both political camps could become the new norm, even if it seems like a lonely limb to be on right now. If Disney is left standing on its own as a cautionary tale of trying to woo two sides and alienating both in the process, will it really still be newsworthy months from now? Time and financial results heal wounds, and Chapek could go from battling two sides to one to none by early next year.
