Fast Money Blog- 11/25/22

So, you thought that major corporations don’t have behind-the-scene dramas worthy of a screenplay? Think again.

The big story this week on Wall Street was the unanimous decision by Disney’s board of directors to quickly fire CEO Bob Chapek after a $1.5 billion loss in their recently released Q4 earnings. Wall Street was even more shocked to hear that his replacement would be former Disney CEO Robert Iger. For those of you who aren’t aware, Iger served as Disney CEO for 15 years and led the company to record financial results. He was also the mastermind behind Disney’s acquisitions of Pixar, Marvel, Lucasfilm and the majority of 21st Century Fox, and successfully introduced their streaming service Disney+.

Once again, Iger will be among the highest-paid executives in Hollywood. Upon agreeing to serve as CEO through the end of 2024, Iger will earn a $1 million base annual salary, an annual bonus up to $1 million as well as an annual incentive-based award with a target value of $25 million. This means that he has the potential of pulling in around $27 million EACH year.

By comparison, Chapek had a base salary of $2.5 million, with an annual target of pulling in $20 million. He is reportedly receiving a severance package of $20 million. Man, no matter how you look at it, that’s a lot of money!

How Do Fortune 500 Companies Fire Top Executives?

Here’s how it works: this process is both sad, humiliating and surprising. After the Board of Directors has its secret meeting over the weekend, when the CEO shows up for work on Monday morning he’s not allowed to enter the premises. Once notified of his termination, he must turn over his keys and electronic access cards and follow the process for collection of all company property. Then within 28 minutes or less the company goes about disabling all of the his access to the computer and telephone systems, withdrawing his signing authority for bank accounts, and cancelling any company credit cards. Finally the elite security team of 5 to 7 members escorts him off the premises. In Chapek’s case he will never again have access to the Magic Kingdom.

The Money Game and You

When you’re at home selling covered calls and trading stocks you are running with millionaires and billionaires; you just might not always realize how big this game is and how powerful the players really are.

Understanding the significance of corporate profits and losses is a necessary part of your financial education.

Tyrone Jackson, The Wealthy Investor