Disney CEO Robert Iger extends his contract as search for a successor continues

LOS ANGELES – Walt Disney Co. Chairman and Chief Executive Robert Iger has extended his contract by one year as the company’s board of directors continues to search for his replacement.

Disney announced the extension – Iger’s third since he became CEO in 2005 – Thursday morning.

Iger, 66, previously was slated to leave the company at the end of June 2018. His new deal ends July 2, 2019. The move, which had been widely expected, gives Disney’s board more time to search for a successor – a process that has been closely watched by investors who’ve expressed concern over the apparent lack of progress on the issue.

With few obvious internal candidates, the board seems increasingly likely to look outside of Disney for its next chief executive.

“Even with the incredible success the company has achieved, I am confident that Disney’s best days are still ahead, and I look forward to continuing to build on our proven strategy for growth while working with the board to identify a successor as CEO and ensure a successful transition,” Iger said in a statement.

Disney has been transformed by three multibillion-dollar acquisitions orchestrated by Iger: Pixar Animation Studios in 2006, Marvel Entertainment in 2009 and Lucasfilm in 2012. Those deals have provided Disney with lucrative franchises such as “Star Wars” and “The Avengers,” which have been pumped through the company’s diverse ecosystem of businesses. During Iger’s tenure, Disney’s stock price has quadrupled.

The Los Angeles-area company’s stock is up nearly 8 percent this year.

Until February, Iger had been firm in saying he would leave Disney when his contract expired in 2018. But during a conference call with analysts last month he said that he was “open” to extending his deal – if the board deemed that the best course of action.

“It is obvious that the company and its shareholders will be best served by (Iger’s) continued leadership as the board conducts the robust process of identifying a successor and ensuring a smooth transition,” Orin C. Smith, independent lead director of the board, said in a statement.

Thomas Staggs, Iger’s former heir apparent, left Disney’s No. 2 post last year. Staggs’ departure, which came after Disney’s board privately expressed a lack of confidence in him, threw Disney’s carefully orchestrated succession plans into question.

Replacing Iger will be tough in part because of the job description. Disney has a unique culture and far-flung businesses – from superhero movies to cruise ships – that any future CEO would have to fully grasp.

The company’s next leader would inherit a largely different set of challenges from those Iger has tackled. In particular, major changes are afoot in the television industry.

Disney’s cable television business has been hurt by cord-cutting and the slimmed-down TV packages offered by service providers.

ESPN, the crown jewel of Disney’s TV unit, has lost more than 9 million subscribers since 2013, according to Nielsen data, and this month it confirmed plans to lay off a number of on-air personalities. Recently, Disney has made moves designed to strengthen its media operation, including a $1 billion investment last year in video streaming company BamTech.

“You probably need someone who is more new-media oriented, so it probably needs to be somebody outside the company,” Michael Alpert, portfolio manager at Stralem & Co., which owns 269,000 shares of Disney, said this month.

“It’s not just the cable business, theme parks business anymore,” Alpert said. “Somebody has to have a grip on that.”

Under terms of his contract extension, Iger’s compensation will be determined using the same formulation as before. In fiscal 2016, Iger’s total compensation was $43.9 million. His new pact calls for him to receive a $5 million bonus if he remains CEO until July 2019.

As part of the extension, Iger will remain as a consultant to Disney for three years after his CEO term ends. During the consulting period, he will receive $2 million for each of the first two years, and $1 million in the final year.