Friday, April 22, 2016

Taking A Mulligan on Disney Succession Plan Good Governance According To Yale's Jeffery Sonnenfeld? Please!

Jeffery Sonnefeld, Associate Dean of the Yale School of Management, claims that shredding the succession plan at Disney is "good governance".

This is the kind of nonsense that gets tossed around in a "best practices" business school class. (Don't get me started on "best practices". In my view best practices most often encompass the most mindless behaviors of crowds.)

Taking a "mulligan" in succession planning is not without penalty. There are costs to expanding the search after narrowing it not a year earlier to Staggs. So for the moment the "ball-in-the-water-tee-up-another"" approach means there is no plan, and no guarantee that a new plan will emerge that makes strategic sense. Even more critically, time and disruption in the media business will move inexorably forward, while employees, customers, distributors and investors are scratching their heads, wondering how the company so misjudged its leadership needs a year ago when Staggs was picked.

For those who know Tom, the move is even more misguided. He is a Disney lifer, he knows the two most important businesses (Parks and Media) inside and out, and is/was well liked and respected among employees and investors. What happened here is that Bob Iger, who was an unknown when he took over from Eisener, and who blossomed into a terrific CEO, sided with the big personalities (Perlmutter and Lucas) Studio group on his Board, and made a strategic call about the company. That call is to dive even more deeply into the movie and TV business, where risks abound.

In our view Disney is today and will/should be an integrated creative and distribution enterprise. The company leverages intellectual property across a wide and deep set of platforms. Not all content works across all platforms, and not all content nor platforms should be valued by investors in similar ways. We still believe that the film business is a hit business, not terribly predictable and should be valued at lower multiples than Media or streaming business, which are more predictable.

The notion that Tom is not creative enough or not able to respond to the reality of multi-dimensional disruption in the media universe is foolish. And what was the result? The company is without a succession plan.  It has lost a terrific executive.  It has signaled to existing executives that they have no future either at the company and should look elsewhere, soon, as well.

So how is this "Good Governance"?

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