Bob Chapek leaves his CEO position at Walt Disney Co. with a final settlement package, including benefits that could be worth $23 million or more. This excludes the stock options he held, which can provide more if Disney’s share price recovers.
As per Bloomberg news, this amount is based on the company’s disclosure during regulatory filings. Walt Disney has not yet disclosed the terms of the CEO’s departure, and a company representative did not respond to the request for comments.
Chapek’s joining contract entitles him to get the salary for the entire term if he is told to quit prematurely. His term runs till mid-2025, and the salary between his departure now and then adds up to approximately $6.5 million.
Chapek is also entitled to a pension accumulated over his long tenure with Disney. The accrued pension stood at $16.9 million as per October 2021 filings. This money he can withdraw irrespective of the circumstances of his leaving the job. He will get more for the rest of the period though it is unclear how much it amounts to.
Vesting of Stock Options
Chapek also holds substantial stock options allotted to him during his CEO tenure, but most of their value is low since Disney’s stock plunged 41% this year. If he had exercised his sale option of the securities held by him, he would have got $3.5 million based on the share price in New York Friday market closing.
More stocks he received earlier in his tenure have not yet been vested, and they will continue to vest even after he leaves the company. The value of these stocks depends on the stock price value in the future. If the price increases, the stock, and the option’s value will likely swell further.
Walt Disney’s share price jumped to $99.82, up 8.7% in New York Friday. It was the highest jump since August 11 this year.
Chapek also has investments in a deferred compensation plan, like the 401(K) plan that many organizations set up for high CTC employees. Chapek has around $8.5 million invested in this plan.
The Severance Package is not Final
As of now, all these are not sacrosanct. It is common for Boards to negotiate exit agreements with CEOs, especially when the exit is in contentious circumstances. If the board concludes that the CEO violated the company’s policy or did not fulfill the commitment as per the employee contract, it may not pay any exit compensation at all.
Disney’s statement did not give any reason for Chapek’s exit and reinstatement of his predecessor, Bob Igor, as the new CEO.
Though Chapek’s package as CEO was generous, it was much lower than the entitlements enjoyed by other entertainment industry organization CEOs. In 2020, when Chapek became the CEO of Disney, the board set his target compensation in the lower quartile for media CEOs. This move was after a controversy over Bob Iger’s pay which was criticized by shareholders, regulatory authorities, and an heir from Disney’s Family.
