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Disney's Departing COO Creates Succession Concerns

By Motley Fool Staff - Apr 21, 2016 at 10:01AM

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Disney lost its CEO heir apparent and that's creating drama at a company that has otherwise been doing very well.

The Walt Disney Company (DIS 3.51%) saw a flurry of change recently in its C-suite as Tom Staggs, chief operating officer and heir apparent to Bob Iger's role as CEO, announced plans to leave the company in early May.

In this clip from the Motley Fool Money radio show, Chris Hill, Simon Erickson, Jason Moser, and Andy Cross talk about the management drama. Also, they look at some areas Disney might diversify into in the near future as the media landscape keeps changing.

A transcript follows the video.

This podcast was recorded on April 8, 2016. 

Chris Hill: We begin this week with surprising news out of the Magic Kingdom. Chief Operating Officer Tom Staggs has worked for the Walt Disney Company for more than 25 years, and was widely seen as the heir apparent to become CEO when Bob Iger steps down in two years. But that is now over. According to The New York Times, Iger met with Tom Staggs in mid-March and told him that the board of directors would be widening the search for the next CEO. And Staggs, Simon, decided to leave the company in early May. So, now, Disney has to find not just someone to be the next CEO in a couple of years, but they have to find a chief operating officer, too.

Simon Erickson: And how do you replace Bob Iger, right, Chris? I mean, this is a guy who's a legend. Hail to the chief, great chief executive officer for Disney for the last decade. Share price has almost quadrupled under his tenure. He's always been kind of thought of as the media juggernaut that is Disney.

The acquisitions of Lucasfilm, and Marvel, and companies like this. But I think the transition, when and if this ever happens, is going to have to be from, "Hey, we've got a great media empire, we made some great media acquisitions out there." I think the next phase for Disney is going to be digital distribution out there. You've got Netflix and Amazon that are broadcasting pretty good content over the Internet now, and I think Disney... they have that content, but I think they're a step behind on figuring that part out.

Hill: Jason, I like the fact that this is a show of strength by the board of directors. As investors, we want to see our boards of directors not just rubber-stamping someone.

Jason Moser: Sure.

Hill: By the same token, Tom Staggs is no slouch. There's a reason he was widely seen as the next CEO. And they have a problem in the C-suite now.

Moser: What was that in Caddyshack? "Come on, Judge, you're a tremendous laugh." I just... maybe he just really doesn't have what it takes, and maybe that's what they ascertain from this. Honestly, we've talked a lot about this -- how do you follow in the footsteps of what Bob Iger has done? It has been really phenomenal. Simon mentioned the trifecta of acquisitions that he's headed. It's not to say that nothing else will happen while he's still there. I honestly think shareholders will probably be OK with him sticking around for a little while longer.

To your point, yeah, you never want to see a board rubber-stamping something like this. They do really need to figure out the strategy in regard to ESPN and this move to over-the-top distribution, because it is something that's going to come to fruition here at some point. They've mentioned it on a number of calls, and because ESPN is such a profitable and important part of the business, they kind of have all their other ducks in a row. This is the question mark that's still out there. So, I think they just need to make sure they have an executive who's going to be able to lead them forward in regard to this strategy.

Hill: Andy, where do you think they go here? Do you think Iger stays on for another year or even longer?

Andy Cross: I'm wondering if Tom Staggs is checking his LinkedIn profile and who has endorsed him, what skills, has Bob Iger taken his away from him. Certainly, I think it extends the timeline of when Iger can hand over the baton, pass it to a leader. And who that is... one conversation we were talking about, it was really interesting, is Steve Burke, who's over at NBCUniversal, which is a subsidiary of Comcast. It was his father, who along with Tom Murphy built Capital Cities. Burke is president of a media division. He's under in a company Comcast that his family owned, run by the Roberts family. Probably not going to take the helm of that job anytime soon. Could be an interesting opportunity for him. 

Erickson: I'm throwing Sheryl Sandberg in the hat as well, Chris.

Hill: She is on the board of directors. It wouldn't be the first time we saw someone move from the boardroom to the CEO's office.

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