Disney Executive's Departure Leads to Outside Hunt for Next CEO

Tom Staggs Will Step Down Next Month

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Tom Staggs
Tom Staggs Credit: Daniel Acker/Bloomberg

For years, Walt Disney Co. Chief Operating Officer Tom Staggs was being groomed to succeed Chairman-CEO Robert A. Iger at the world's largest entertainment company. Now those plans are off.

Mr. Staggs is stepping down from his role next month, a surprise move that forces Disney to look outside the company for its next chief executive officer. Whoever replaces Mr. Iger, a 65-year-old whose contract is up in June 2018, is almost certain to be the first outsider to begin running the company since Michael Eisner in 1984.

"This adds a degree of uncertainty and risk to the Disney CEO succession plan that did not previously exist," Goldman Sachs & Co. analyst Drew Borst said in a note Tuesday. Mr. Borst has a neutral rating on the stock.

Mr. Staggs, 55, had difficulty convincing some board members he was the right person to take over, according to a person with knowledge of the matter. He and Disney decided to part ways, said the person, who asked not to be identified discussing a personnel matter.

Disney, like all media companies, has seen its shares tumble as investors worry about the loss of conventional TV viewers to internet services like Netflix and Hulu , in which Disney has a one-third stake.

Disney triggered a rout in media stocks in August 2015, when the company said on an earnings call that profit at the company's ESPN sports network wouldn't grow as quickly as projected because of viewer losses.

The company's parks and resorts division, which Mr. Staggs ran before becoming chief operating officer, has continued to flourish as the company approaches the June opening of its Shanghai resort, the company's biggest international investment. Profit at the parks increased 14% last year to $3.03 billion while revenue grew 7% to $16.2 billion.

Disney's movie business has also soared with hits like the new "Star Wars" film and a series of animated and live-action pictures, including superhero features based on Marvel comics.

Part of the reason Disney is likely to count on an outsider to succeed Mr. Iger is because all the other promising internal candidates have left. Mr. Staggs became chief operating officer in February 2015, winning a two-person race for the job with former Chief Financial Officer Jay Rasulo. Another possible successor to Mr. Iger, former TV division co-chair Anne Sweeney, departed in January 2015.

Mr. Staggs will remain employed by the company in the role of special adviser to Mr. Iger through the current fiscal year ending in September, Burbank, Calif.-based Disney said in a statement Monday. No reason was given for his departure.

"It's shocking," said Laura Martin, an analyst at Needham & Co. "Tom was Wall Street's fair-haired boy. The market is going to be unhappy about this."

26-Year Veteran

A 26-year Disney veteran, Mr. Staggs rose through the ranks in a career that started in strategic planning before reaching the No. 2 spot. Disney said its board will broaden the scope of the succession planning process to identify a slate of candidates. Mr. Staggs didn't respond to a request for comment.

"Tom has been a great friend and trusted colleague for more than 20 years," Mr. Iger said in the statement. "He's made important contributions to this company, earning wide respect across the organization for his achievements and personal integrity."

-Bloomberg News

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