In a blog last month covering comments Advisory Board member Douglas Chia made to open the “Corporate Governance: A Master Class 2023” on April 11, 2023 in New York City, Doug set the stage for the “war on two fronts” companies face with regard to ESG – one being the relatively new front of politics since legislatures “are not as often involved in corporate governance as the other branches. But when they do act, they can fundamentally change the rules of the game.” That blog is worth reading. Last week, Doug published a blog about how Disney’s CEO virtual shareholder meeting addressed that war. Doug starts off describing the event:
“VSM attendees were treated to footage of the brand new Tron: Lightcycle Run at Disney World, a never-before-seen extended trailer for Guardians of the Galaxy, Volume 3, and a special appearance by Dwayne ‘The Rock’ Johnson to announce the upcoming live-action remake of Moana.”
In the Q&A, CEO Bob Iger handled some tough questions about how the company is responding to Florida’s anti-ESG and anti-DEI pressures. Doug said:
“Iger gave the best response I’ve ever heard from a CEO to the question of whether and when corporations should take stances on social/political issues. His answer was absolute perfection.”
I won’t steal Doug’ thunder and reproduce the entire excerpts in his article, but here are a some snippets:
Q: … is it wise for the company to take political positions to satisfy a very small portion of the people when our primary mission is entertainment, not education.
A: There are going to times when we decide to weigh in on an issue that we believe is worthy of debate because of its relevance and importance to our business or to our employees. And there are there are times when I actually believe we shouldn’t. But, I strongly feel that we alone have to determine whether, when or how to weigh in on a on an issue, whether it’s private or public, of course with the standard that, when we take a position on those matters, there’s a true reason why we have. And in almost all cases, it has to be because it has to be because it directly affects our business or our people.
Q: … what steps have already been taken, or will be taken, to protect shareholder value with regard to the legal battle between Disney and Ron DeSantis and the Reedy Creek Improvement District where we’re kind of all concerned about that here for tax purposes?
A: … a year ago the company took a position on pending Florida legislation. And while the company may have not handled the position that it took very well, a company has a right to freedom of speech, just like individuals do. And obviously, in taking the position, the governor got very angry about the position Disney took. And it seems like he’s decided to retaliate against us, including the naming of a new board to oversee the property and the business, in effect to seek to punish a company for its exercise of a constitutional right. And that just seems really wrong to me, against any company or individual, but particularly against the company that means so much to the state that you live in.
… we are the largest taxpayer in the state. And you may find this interesting as it relates to future taxes, but we’re currently planning now to invest over $17 billion in Walt Disney World over the next 10 years. And those investments, we estimate, will create 13 thousand new Disney jobs and thousands of other indirect jobs. And they’ll also attract more people to the state and generate more taxes. And so our point on this is that any action that thwarts those efforts simply to retaliate for a position the company took sounds not just anti-business, but it sounds anti-Florida.
What This Means
Companies face new threats in the face of politicization and weaponization of ESG and DEI issues. Management and boards must decide which of these to respond to and how to do so. As part of that, senior management must be prepared to explain or defend their actions – or inaction – on these issues in various venues, including shareholder meetings. Using Doug’s analogy, management must be prepared to be the Guardians of [their company’s] Galaxy.
