Deadline: Bob Iger’s Return Engagement As Disney CEO Sees A Plot Twist In Abrupt Exit Of A Long-Tenured Lieutenant, CFO Christine McCarthy

Story from Deadline:

Earnings calls, those ritualized quarterly opportunities for public companies to convey the state of their financial affairs to Wall Street analysts and investors at large, are two-handed affairs for the Walt Disney Co.

Unlike other media companies, which stack their calls with three or more execs weighing in on various aspects of the business, Disney’s have featured only the CEO and the CFO for more than a decade. That focused approach has helped enlarge the profile of Christine McCarthy, who was promoted to CFO in 2015. The well-respected finance exec has articulated the strategy behind the company’s many strategic moves, including massive M&A bets, preparations for the launch of Disney+, dramatic adjustments during Covid and, most recently, sizable cost cuts and layoffs as well as the removal of streaming programming from Disney+ and Hulu.

In August, when Disney next reports earnings, the duo act will see its first change in many years, after McCarthy abruptly stepped down Thursday to take family medical leave. She will stay on the payroll for through mid-2024, serving as an advisor to help with the transition as longtime company veteran Kevin Lansberry becomes interim CFO and a permanent successor is chosen.

While the announcement came as a surprise to people outside and inside the company, it was accompanied by the customary tossing of semantic bouquets. CEO Bob Iger called McCarthy “one of the most admired financial executives in America,” saying her impact on the company during a 23-year run “cannot be overstated.” McCarthy said she will “always be rooting for the success of my extended Disney family.”

No details about the medical leave were given in the official announcement. Reports later emerged that McCarthy’s husband has been ill, though it also appeared that no specific health-related incident prompted her leave. Instead, the motivating factor appeared to be differences of opinion between McCarthy and some colleagues. The Wall Street Journal characterized it as a “clash” between McCarthy, who had a long career as banking executive before joining Disney in 2000, and others in top management over the scope of Disney’s recent restructuring. Earlier this year, the company laid off about 7,000 employees (roughly 3% of its global workforce) and has projected it will deliver $5.5 billion in cost savings. Even after the downsizing, there are looming questions about the future of ESPN as well as the fate of Hulu as a multi-billion-dollar deadline with minority stakeholder Comcast approaches.

McCarthy, 67, worked closely with two CEOs, Iger and Bob Chapek. The latter took on the top job in February 2020 just as the pandemic was beginning its march around the globe, grinding Disney’s sports, theme park and theatrical movie operations to a halt. While Chapek earned high marks initially for keeping the company afloat, he had a tougher time once normalcy started to return. McCarthy ended up flagging some of his decisions, including streaming subscriber targets she and others felt were unrealistically high, to the board of directors. By the fall of 2022, the board had dismissed Chapek and installed Iger.

While Iger’s second CEO turn briefly boosted Disney’s battered stock, the upturn proved short-lived as investors took full measure of the challenges facing the company. Cord-cutting, a soft advertising market and vexing questions about the economic model of the subscription streaming business are weighing on investor sentiment, even though the theme park unit has rebounded strongly from its Covid ordeal.

The sudden exit of McCarthy is a complication for Iger, who is under contract only until the end of 2024. In addition to identifying his own successor (something that has been a struggle at Disney over the decades), Iger now also has to select a key collaborator in the CFO role. While Lansberry is a seasoned 30-plus-year veteran and has been serving as CFO for the parks division, the most urgent area for the company’s financial stewards lie in its TV, film and streaming operations.

Disney-ologists will recall a previous moment of palace intrigue centered on the CFO role. Iger was widely reported to have designated longtime CFO Tom Staggs as his successor, only to abandon the plan for reasons that have never been given a full public explanation. Staggs, who now runs Candle Media with fellow ex-Disney exec Kevin Mayer, left Disney in 2016, a year after McCarthy was elevated to CFO and he ran the theme park division and earned the title of Chief Operating Officer.

On May 17, less than a month before the announcement of her departure, McCarthy appeared alongside ad sales chief Rita Ferro at a conference hosted by Wall Street firm MoffettNathanson. Asked by analyst Michael Nathanson about progress in the company’s efforts to overhaul its direct-to-consumer streaming business under Iger, McCarthy said it was like solving “a big puzzle. This isn’t a 300-piece puzzle. This is 2,500-piece” one. The process “is tough work” and “emotionally draining,” the exec continued. “And yes, we know there are headwinds in this industry. There are challenges, but we look at the hand that we have to play, and it’s a great hand. … We’re winners, and we are going to win.”