In a recent earnings call, CEO Bob Iger of Walt Disney (DIS) announced plans to cut costs by $5.5 billion and reinstate the company’s dividend. While this news was well-received by investors, it has raised concerns among those who prioritize environmental, social, and governance (ESG) investing.
To achieve its cost-cutting target, Disney will be reducing its workforce by approximately 7,000 jobs. However, these cuts are not expected to affect employees in hourly front-line roles at the theme parks. Despite the positive response from analysts and the market, critics argue that prioritizing shareholders over the well-being of its 22,000 workers worldwide is a cause for concern.
Adding to the controversy is the stark disparity between CEO pay and worker salaries. Bob Iger is one of Hollywood’s highest-paid CEOs, with an annual base salary of $1 million and a long-term incentive award valued at $25 million. This large pay gap has drawn criticism and further fueled the debate surrounding executive compensation.
R. Paul Herman, CEO of HIP Investor, a California-based sustainability ratings provider, highlights the contradictions between Disney’s cost-cutting measures and its generous CEO pay package. According to Disney’s 2022 proxy statement, the CEO-to-worker pay ratio stands at 644 to 1, which is higher than average compared to its peers. For instance, Netflix (NFLX) has a ratio of 202 to 1, while Paramount Global (PARA), which includes CBS and Viacom, has a ratio of 212 to 1.
The optics of pursuing cost reductions while simultaneously increasing dividends raise concerns from an ESG perspective, particularly in relation to high CEO pay. Shareholder proposals on “say-on-pay” have frequently targeted such disparities in executive compensation.
Disney finds itself at a crossroads, attempting to balance its financial goals with its commitment to social responsibility. The company’s cost-cutting measures and CEO pay gap have sparked controversy and left some questioning its dedication to ESG principles.
Disney’s Corporate Social Leadership
Disney, under the leadership of CEO Bob Iger, has garnered attention for its corporate social responsibility efforts. While Iger may not be Hollywood’s highest-paid CEO, with that title potentially going to Warner Bros. Discovery chief David Zaslav, Disney excels in other areas.
The company has displayed a commitment to gender diversity and has shown support for the LGBTQ community. Notably, Disney stood by its employees amidst controversy in Florida surrounding the “don’t say gay” issue.
Disney’s achievements are not limited to social initiatives. In terms of overall corporate responsibility, the company ranks highly compared to its media peers. It has earned an impressive score of 98 out of 100, taking into account factors such as people, planet, and trust. Within the broader business landscape of 11,000 companies worldwide, Disney’s HIP Rating stands at 61. This rating is impacted by the CEO-to-worker-pay ratio.
Other ESG scorekeepers also recognize Disney’s efforts. MSCI, the largest ESG rating company, has assigned Disney an “A” rating among its 68 media and entertainment peers. The company is acknowledged as a leader in corporate governance, human capital development, and privacy and data security.
Despite its accomplishments, Disney has faced criticism from an anti-ESG activist who believes that during good economic times, companies like Disney engage in “virtue signaling.” Yet, regardless of Disney’s endeavors, there always seems to be a critic ready to voice their opinions.