Company-wide furloughs went into place for all U.S. based, non-essential Cast Members and employees (including Disney Parks & Resorts, Walt Disney Imagineering, Disney Cruise Line, Disney Store, and Walt Disney Studios) yesterday, April 19. Disney has secured full health benefits for their employees during the temporary furlough as well as auto-enrollment for all Florida Cast Members into the unemployment benefits system. With over 100,000 employees no longer getting paid, Disney will be saving up to $500 million a month across its many theme parks and hotels worldwide, which have now been closed for up to five weeks.
Despite leaving nearly half of its workforce without any income beyond unemployment benefits and a $600/week CARES Act bonus (available through July 31), the company remains protecting bonuses for its executives, as well as a $1.5 billion dividend payment going out to its investors in July.
The Walt Disney Company has seen a whirlwind month within the market, getting out-performed by Netflix only to gain advantage shortly after with the White House’s announcement for a phased reopening of businesses to potentially begin in May. The company’s senior executives took pay cuts starting on April 5th, with Executive Chairman Bob Iger forgoing 100% of his salary and current CEO Bob Chapek reducing his salary by 50%. Bob Chapek’s base salary is currently $2.5 million, according to a document filed with the Securities and Exchanges Commission. He is also eligible for a bonus of “not less than 300% of the annual base salary.” Cutting or suspending dividend payments would likely cause further turmoil for Disney within the market, with an increased likelihood of plummeting stock prices in the future. The company currently has accrued $13 billion in debt and credit agreements in order to mitigate the financial effects of closing down its parks and film studios.
Source: Seeking Alpha
I’m just not sure I understand what Bob C needs with that amount of money at this time (or ever really. Why do we allow people to make that much money when their employees are having to live paycheck to paycheck?). Bleh. An ethical dilemma.
I’ve learned to be a wee bit careful when reading SeekingAlpha articles and basing opinions on them. For example, Chapek’s bonus might be “not less than 3x,” but it’s also not automatic. According to what I’ve read in their SEC paperwork, and understood from shareholder calls, the bonus is tied to company performance metrics. It’s unlikely the company will hit any of its numbers this year, which might well result in a bonus cut or elimination. We don’t know, is the point: to say “Executive Bonuses Not Cut” is inaccurate and a little inflammatory. “No decision on executive bonuses” would, in the here and now, be more accurate, or “Executive Bonuses Not Cut At This Time,” even. Disney’s one of the few major entertainment corporations to have covered employee pay for as long as they have (compare to, say, MGM Entertainment or Caesars Entertainment in Las Vegas, who laid people off almost immediately), so they’ve perhaps earned a slight benefit of the doubt. SeekingAlpha articles are often a little hidden-opinionated; to suggest that the furloughs are “saving” $500MM/mo is a little disingenuous, as I’m sure the company would much rather spend the $500MM and open the parks to get their revenue going again.
Thank you Don for explaining it in terms most of us can understand!! Your reply seems very well researched and thought out.
Eat the rich
This should be played at Rock n Roller Coaster.