Battle of the Bobs (Sort of) Continues as Christine McCarthy Departs as Disney CFO

Disney CFO Christine McCarthy is leaving her role and taking a family medical leave of absence. Since this news broke, new details have emerged casting the official story into doubt, rekindling drama from the Battle of the Bobs, calling into question whether Bob Iger will stick around longer as CEO, and more.

Before we delve into the palace intrigue, let’s start with the basics of McCarthy stepping down from her role as Disney’s Chief Financial Officer. Replacing her will be Kevin Lansberry, current Executive VP and CFO of Disney Parks, Experiences and Products (DPEP), effective July 1, 2023. Lansberry has served numerous roles with DPEP, most of which were Florida-centric, including VP of Animal Kingdom.

Lansberry will serve as Disney’s interim CFO. The company will immediately begin an “internal and external” search for a permanent CFO, with McCarthy agreeing to serve as a “strategic adviser” during her leave, helping to onboard her permanent successor. This is likely due to Lansberry’s experience being entirely Parks & Resorts, and Disney’s biggest financial challenges right now all existing on the entertainment side of the business.

“Christine McCarthy is one of the most admired financial executives in America, and her impact on The Walt Disney Company during 23 years of dedicated service cannot be overstated,” Disney CEO Bob Iger said in a statement.

“Christine has served as a key strategic anchor during a period of great transformation, and she and I have discussed her desire to ensure an orderly and successful CFO succession in advance of the company’s transition to its next chief executive officer. She is stepping down from her CFO role as she takes family medical leave, but has graciously offered to move into an advisory position to assist her successor in assuming the duties she has so expertly handled these many years.”

McCarthy added that she is “immensely grateful for the opportunity Bob provided me to serve as CFO of this iconic company and am proud of the work my talented team has done to position Disney to capitalize on the business possibilities that lie ahead. Although I am leaving the CFO role, I look forward to helping with the transition and will always be rooting for the success of my extended Disney family, who have shown time and again that determination, teamwork and the pursuit of excellence are an unstoppable combination.”

McCarthy has been with the Walt Disney Company since 2000, when she began her tenure as its treasurer, before being named to the CFO role in 2015. McCarthy was one of Iger’s principal deputies, and has been a mainstay of earnings calls since as long as I can remember. She explained the company’s finances and fielded questions from analysts, and was generally well respected by Wall Street.

McCarthy’s contract had been extended in 2021 through June 2024. According to a securities filing by Disney, McCarthy will continue to be employed by the company through that date, albeit in her strategic adviser role. Her compensation will remain unchanged; McCarthy was paid more than $20 million in fiscal 2022.

In his promotion to interim CFO, Kevin Lansberry will relocate from Orlando to Disney’s corporate headquarters in Burbank, California. The company will provide housing and a pay bump consisting of a $1 million base salary, a $1 million annual target bonus, and $3 million in a long-term incentive plan.

McCarthy was one of very few key Iger lieutenants to not only stay on, but then become loyal to Bob Chapek when he took over as CEO in 2020. It was also widely reported that McCarthy orchestrated the eventual ouster of Chapek, going to Disney’s board of directors with complaints about his leadership.

She reportedly told the board that she lacked confidence in Chapek, and that was likely instrumental in their decision to replace him. “He irretrievably lost the room,” said the leader of a Disney unit. McCarthy was subsequently dubbed the “king killer” and there were rumors shortly thereafter that she could be a credible candidate to eventually succeed Bob Iger as CEO.

Chapek wasn’t the only high-ranking executive McCarthy helped push out. She also was instrumental in Chapek’s abrupt firing of Peter Rice from his role as chairman of Disney’s general entertainment unit, which oversaw content strategy for much of the company’s television and streaming businesses. McCarthy questioned Rice’s management style and financial decisions. The firing of Rice ended up leading to reporting that Chapek was paranoid about Rice posing a threat to his power.

Perhaps apropos of nothing (or maybe everything), McCarthy reminds me of Gerri from Succession.

While “rumors” of McCarthy’s further accession swirling following Iger’s return, there was also the internal skepticism and suspicion of her. Some inside the company that Iger wanted to “ease out” McCarthy because of her loyalty to Chapek, but doing so more gently than his dismissal of Kareem Daniel, who Iger ousted at 6:30 a.m. following the Sunday surprise that Chapek was out and Iger was back in.

It’s entirely possible that McCarthy knew this, and wanted to shore up her strength and support with the “rumors” that she could be CEO. (Again, shades of Succession here–or Game of Thrones, minus the bloodshed, for those who didn’t watch the newer HBO prestige piece.)

Sources told Hollywood Reporter that McCarthy was vulnerable for having backed Chapek too enthusiastically…until she didn’t. They also suggested that she would’ve been out earlier, were it not for the “Restore the Magic” proxy fight brought by activist investor Nelson Peltz.

McCarthy was instrumental in beating back against that, and Peltz ultimately abandoned his fight in dramatic fashion live on CNBC immediately after an on-air interview with Iger. (And perhaps more importantly, Disney reporting strong earnings and implementing some of the changes pushed by Peltz.)

McCarthy had also orchestrated the move to hire the consulting firm McKinsey last year to explore cost-cutting measures. She is described as having a “passion” for cutting costs, which led to clashes with creative executives, who are more aligned with Bob Iger. Even as the company has embarked upon significant layoffs, Iger has reportedly moved to protect key creatives and empower them within the company.

McCarthy “reveled in the expanded power of corporate,” one Disney veteran told THR. “She had probably enjoyed more power and influence in the company than at any time in her career. The hiring of McKinsey was her idea, and they hired McKinsey with an absolute agenda.”

New reporting from The Wall Street Journal indicates that McCarthy clashed with Iger and other top executives over strategy prior to her departure. This included the amount of money Disney spends on content and a recent restructuring that she felt didn’t go far enough to streamline the company.

Iger’s first major move upon returning was a reorganization that created three main units: DPEP, ESPN, and Disney Entertainment. The last of the trio is movie and television operations, as well as streaming services Disney+ and Hulu. McCarthy pushed for further consolidation in Disney Entertainment to improve profit margins and give Disney a leaner structure more akin to Netflix. This put her at odds with the unit’s leadership, and Bob Iger.

McCarthy also believed that Disney executives and directors should be required to own a significant amount of stock to make them more conscious of shareholder concerns.

As noted at the top, the official explanation for McCarthy stepping down is that she’s taking medical leave. McCarthy has an ailing husband, who has been in a healthcare facility since the start of the year. Nevertheless, her abrupt exit caught colleagues and associates by surprise. A person familiar with McCarthy’s situation told WSJ that there have been no dramatic changes in her life recently that would require her to step back.

To that point, McCarthy is known for her nonstop work habits and loyalty to the Walt Disney Company. She battled cancer twice, and would often leave work for treatments at St. Joseph hospital next door to Disney’s headquarters, and then return later in the day. “Some doctors and nursing staff thought I was crazy but those who knew me and my history were amused,” McCarthy told the Wall Street Journal.

Turning to commentary, we’ll start by stating what’s likely obvious–that McCarthy’s departure is less a medical matter and more due to internal corporate politics. However, there is unquestionably a medical component to this, and we want to be sensitive to that.

Our guess is that McCarthy’s concerns were disregarded and it was made clear to her that she was not being seriously considered as the future CEO. Against that backdrop and with her husband undergoing what sounds like serious treatment, it’s possible that she opted to reevaluate her dedication to Disney and step back. In which case, who could blame her?

Or, maybe Iger had reached the next phase in his consolidation of power, and made it clear to her that she would be leaving Disney one way or another. With that, this was the most dignified path forward for all parties. Regardless of the reason, the destination is the same.

We already know how this is going to be perceived by most Disney fans, because McCarthy wasn’t exactly beloved. We already offered extensive commentary on Christine McCarthy in our post late last year about her as the potential future CEO. There, we put it in blunt terms: Christine McCarthy becoming CEO would be Iger and Disney’s board making the same mistake twice. 

That article called Chapek and McCarthy two sides of the same coin. Based on everything we’ve seen and heard from McCarthy, there’s little reason to believe she is capable of being the charismatic leader that the Walt Disney Company, an inherently creative enterprise with a visionary founder, needs. However, that piece also encouraged fans to forgive her worst “sins” which were that infamous guest waistlines joke, Genie+ comments, and other poorly-received remarks.

None of our past criticism was to say that Christine McCarthy was bad at her job, deserved to be fired, or anything of that sort. By all (reasonable) accounts, McCarthy was an exceptional CFO. She has been with the company a long time, was instrumental in key acquisitions under the Iger regime, and then with securing sufficient cash reserves in the early days of the pandemic.

While fans may not like a lot of the decisions, but that’s the nature of the CFO role. I cannot imagine most fans having a favorable opinion of Disney’s CFO no matter who it were, as the position is inherently at-odds with fan desires. McCarthy has helped achieve enviable financial results in the last two years, and her tenure as CFO will undoubtedly be looked upon favorably by Wall Street investors and analysts.

Moreover, her departure reportedly came after clashes over cost-cutting in the Disney Entertainment division, which houses Disney+ and Hulu. She wanted the company to be leaner, like Netflix. While streaming has “improved” from its billion dollar quarterly losses, it’s still an uphill battle for Disney+ to attain profitability, and the looming acquisition of Hulu is going to further strain the company.

As a fan first and foremost of Walt Disney World and Disneyland, cutting costs on the streaming divisions does not bother me in the least. Making them leaner also does not concern me, especially with each new revelation of eye-popping costs for specific productions. It’s pretty obvious that Disney (and other streamers) are burning money on expensive shows that not enough people are watching. Meanwhile, Walt Disney World continues to be the golden goose.

To be sure, I do think Disney+ will be viable and one of the (few) winners of the streaming wars in the long-term. It wouldn’t be pragmatic to chase every trend and mimic competitors (especially not Warner Bros!), but Netflix’s leaner approach does seem to be working. Netflix’s stock has rebounded in a big way this year, and none of its competitors–including Disney–have followed suit.

Personally, I also think owning a significant amount of stock in the company where you’re a high-level decision maker is a good thing. It takes the idea of fiduciary duty up a notch, and gives leaders a vested interest in the company’s success. I’m sure there are plenty of critics who would accuse Disney of making dubious business decisions in the last couple of years, and this would be a check on that–putting their money where their mouth is, so to speak.

Ultimately, I doubt many Disney fans will see it that way, though. McCarthy was long ago cast in the ‘villain’ role alongside Bob Chapek, and her comments coupled with her decisions and justifications as CFO thoroughly lost the fan community. Once again, that’s the nature of the Chief Financial Officer position, and it seems highly unlikely to me that there is any conceivable CFO who fans would love. That just isn’t gonna happen–just like you won’t find termites who are fans of any exterminators. (Not that we fans are insects who deserve to be eliminated–bad comparison, but you get the idea!)

The problem before was that the Walt Disney Company had two people at the top–Christine McCarthy and Bob Chapek–who thought and acted like CFOs. That’s not McCarthy’s fault–CFO was her job title! She could’ve made an excellent Roy to someone’s Walt, or Frank Wells to someone else’s Michael Eisner. But to have two Roys or Wellses and zero Walts or Eisners…now that is an issue. And it’s one Disney already remedied by canning Chapek.

Nevertheless, it’ll be interesting to see where this goes next. Disney has already made clear that Kevin Lansberry is the interim CFO, meaning he probably won’t be the permanent CFO. Given the issues with streaming and cord-cutting, that makes sense and it seems like a safe bet that Disney will pursue someone in Hollywood for that role.

However, one potential wildcard there is how long it takes Disney to find a new CFO and the degree to which the streaming struggles are turned around in the meantime. As Bob Iger and Josh D’Amaro have mentioned repeatedly, they plan to invest $17 billion into Walt Disney World. There are likewise ambitions for expansion at Disneyland. As we’ve pointed out, that won’t be possible until streaming isn’t hemorrhaging money and Hulu is acquired. If those things can happen quickly, a CFO with extensive Parks & Resorts experience could make sense.

There’s also the question about succession planning for CEO Bob Iger. Already, McCarthy’s departure has resulted in Wall Street analysts and investors to speculate that Disney will extend Iger’s contract, not wanting to find a replacement CFO and CEO simultaneously. Although he claims otherwise, there’s reason to believe Bob Iger would stick around as CEO for another few years…or decades.

For one thing, Iger will want to leave on a high note, and that’s unlikely to be attainable by next year. Streaming will be just starting to break even, and Disney will still be digging out of debt–not quite ready to switch gears again. For another thing, every account suggests that Disney is his life and he doesn’t know what to do with himself when he’s not running the company.

This saga has already contained its fair share of twists and turns, but I think Iger extending probably makes sense for those reasons. It also seems like the company is currently otherwise light on candidates with extensive experience on the entertainment side of the business, and the likely successor would probably come from one of those business units at this point given the challenges faced there. Give it another few years, though. Streaming should be stabilized and Parks & Resorts will once again be in development mode, at which point Josh D’Amaro becomes the natural heir apparent.

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YOUR THOUGHTS

From the outside looking in, do you believe Christine McCarthy stepping down as CFO of the Walt Disney Company is a good, bad, or neutral thing for fans? Thoughts on Kevin Lansberry or Iger extending as CEO? Would you prefer McCarthy, D’Amaro, Staggs, Mayer, or someone else as the next CEO after Iger retires again? Thoughts on anything else discussed here? Do you agree or disagree with our assessment? Any questions we can help you answer? Hearing your feedback–even when you disagree with us–is both interesting to us and helpful to other readers, so please share your thoughts below in the comments!