Sen. Elizabeth Warren tore into the CEO and chairman of the Walt Disney Company on Tuesday with a letter demanding they explain their decision to reward executives with huge payouts amid the coronavirus pandemic while laying off 28,000 employees.
"In the years leading up to this crisis, your company prioritized the enrichment of executives and stockholders through hefty compensation packages, and billions of dollars' worth of dividend payments and stock buybacks, all of which weakened Disney's financial cushion and ability to retain and pay its front-line workers amid the pandemic," the Massachusetts Democrat wrote in her letter (pdf) to executive chairman Robert Iger and CEO Bob Chapek.
"I would like to know whether Disney's financial practices have impacted the company's decision to lay off workers," she continued, "and whether your company plans to extend healthcare or other critical benefits and protections to laid off employees."
The senator's letter follows Disney's announcement last month that the company was laying off the workers.
In a September 29 memo, head of parks Josh D'Amaro told employees that the company had to make "some difficult decisions" and had "modified... operations to run as efficiently as possible" to weather the budget shortfall as a result of the pandemic. D'Amaro asserted that the layoffs were "the only feasible option we have in light of the prolonged impact of Covid-19 on our business, including limited capacity due to physical distancing requirements and the continued uncertainty regarding the duration of the pandemic."
Disney’s own short-sightedness left the company in a cash bind during COVID-19. I want to know how Disney’s financial choices impacted its decision to lay off workers, and if Disney will extend health care or other critical benefits and protections for laid off employees.
— Elizabeth Warren (@SenWarren) October 14, 2020
Warren, in her letter, took issue with D'Amaro for blaming California's "unwillingness to lift restrictions that would allow Disneyland to reopen." Warren countered that the state-imposed measures "were implemented to prevent the spread of Covid-19 and save lives." What's more, she wrote, "nearly 6,400 of the employees you laid off are actually in Florida. And just last week, another 8,857 part-time employees were laid off, also in Florida."
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The senator took further issue with the memo for "fail[ing] to acknowledge Disney's short-sighted business decisions that reduced its capital, including spending billions of dollars to repurchase its own shares over the last decade, rewarding its shareholders through billions of dollars in dividend payments, and showering its top company executives with over-the-top compensation packages and salaries—which reportedly were restored several weeks before the September layoff announcement."
While acknowledging that Iger and Chapek reduced their own salaries in April in light of the economic impact of the pandemic, the senator said the cuts represented a mere "drop in the bucket" and were short-lived. Warren continued:
For example, Mr. Iger earned a total of $65.6 million in 2018 and $47 million in 2019 as a result of this compensation package; hence, his pandemic-inspired salary cut amounted to roughly 3.3% percent of his total compensation in 2019. Similarly, Mr. Chapek, who recently was promoted to CEO, was in line to earn up to $22.5 million in bonuses in addition to his base salary. Even worse, reports indicated that Disney was restoring the meager proposed cuts to executive pay in August 2020—just weeks before the announcement of the 28,000 worker layoffs.
Warren issued an October 27 deadline for answers to a number of questions about the company's recent moves, including whether it would provide healthcare coverage and cover premiums for laid-off employees.
She also demanded to know the total value of stock buybacks made by Disney in each quarter over the past four years, the increase those buybacks had on stock value, and how they may have specifically benefited Disney's top executives.
"It appears that—prior to, and during the pandemic—Disney took good care of its top executives and shareholders," wrote Warren, "and now is hanging its front-line workers out to dry."