Last February, The Walt Disney Co.'s board was hailed for an orderly succession process, free of the drama that had filled its last CEO transition. But just over a year later, the decision on whom to hand the keys to the Magic Kingdom is suddenly a script without an obvious ending.
Disney announced a shocker Monday when it said Thomas Staggs, its chief operating officer who was widely seen as the heir apparent to chief executive Robert Iger, would be leaving his position May 6, though would stay on as an adviser through the fiscal year.
Reports said some board members were not convinced he was the right person for the top job. In a statement, the company said Staggs' "planned departure caps a distinguished 26-year career" and opened the door to outside candidates: "Disney’s board of directors will broaden the scope of its succession planning process to identify and evaluate a robust slate of candidates for consideration."
Whatever prompted Staggs' departure, what's clear is that the media giant's board faces a succession planning process that looks to be much thornier than most. Disney is a company with $52 billion in revenue from a diverse array of properties including theme parks, film studios and television networks, making it harder than usual to find the right resume match.
The company has had only two CEOs since 1984, when it brought in Michael Eisner from Paramount Pictures to take the job, and the transition from Eisner to Iger was pass-the-popcorn dramatic, making this one sure to draw extra scrutiny. Meanwhile, Iger's tenure has been widely viewed as successful, and with two years left on his contract, luring an outsider could be tricky, say some executive recruiters and corporate governance experts.
"I was really surprised when I saw all this," says Peter Crist, chairman of the executive search firm Crist Kolder Associates. "All those moving parts make this a tremendously complex process and decision."
Another complicating factor: While Disney may have plenty of talented people on its management team, some say an obvious next-in-line for the CEO job is missing from the lineup now that Staggs is leaving. Jay Rasulo, Disney's former chief financial officer, departed the company after Staggs was given the COO job last year, which followed a five-year bake-off that included the two executives switching roles.
"If anything unexpected happens to Bob Iger, there’s a leadership vacuum at the top of this company," said Laura Martin, an analyst at Needham Securities who has a "hold" on the company. "There is no plan B.”
A lack of obvious internal candidates, says Noel Tichy, a professor at the University of Michigan’s business school who authored a recent book about succession, makes things particularly challenging for any board. Two years isn’t long enough to groom an internal CEO, he says, while outside candidates typically face long odds. While there are exceptions, such as Alan Mulally’s recent success at Ford or Lou Gerstner at IBM in the early 1990s, “it’s very hard to go outside and get it right.”
Moreover, the challenge of following in Iger's footsteps could give some outside candidates pause, even if his job is one of the most enticing in Corporate America. Since becoming CEO in 2005, Iger has overseen acquisitions of Marvel Entertainment, Lucasfilm and Pixar Animation Studios. The share price more than quadrupled since he took over in 2005. "They're dealing with the Bear Bryant phenomenon of 'how do you follow a legend?’ " says Crist, referring to the longtime football coach at the University of Alabama.
In addition, the timing of Iger's contract adds another obstacle for the board. With two years left, do directors go after someone ready to do the job now, or do they try to find someone they could groom for a few years under Iger’s tutelage? Someone prepared to take the job immediately is unlikely to want to share the reins — particularly given the media world's big egos — while someone brought in to work under Iger might hesitate after Staggs’ grooming and then departure.
Another question mark for any candidate: Could the board extend Iger's contract yet again? It has, after all, done so at least twice before. Perhaps, "but that doesn't solve the fundamental problem" of the succession plan, Needham's Martin says. "Shareholders want somebody as good as Bob Iger to replace Bob Iger."