Elizabeth Warren calls on Disney for massive layoffs after buyouts and big executive pay

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Disney, which is laying off 28,000 employees in the United States, has made “short-sighted” business decisions that have exhausted the legendary company’s capital cushion, Warren said in a letter released Wednesday.

In particular, Warren called Disney (DIS) for “showering its top executives with inflated compensation plans and salaries” and for spending $ 47.9 billion on share buybacks between 2009 and 2018. Share buybacks are a common, but controversial, way for companies to reward shareholders by paying off excess cash.

“It appears that – before and during the pandemic – Disney took good care of its officers and shareholders – and is now in the process of suspending its frontline workers to dry off,” Warren wrote in the letter.

Disney did not respond to a request for comment. The company previously described the layoffs as a “difficult” decision caused by the “prolonged impact” of the pandemic on its theme parks and other businesses. Disney has also indicated that it hopes to eventually hire workers again.

In a statement, Disney said Senator Warren’s letter contained “a number of” unspecified “inaccuracies.

“We have unequivocally demonstrated our ability to operate responsibly with strict health and safety protocols in place at all of our theme parks around the world, with the exception of Disneyland Resort in California,” said Disney. The company added that California “kept us from reopening even though we made deals with unions representing the majority of our cast members that would get them back to work.”

Warren’s letter is the latest example of harsh criticism of Disney’s spending priorities during the pandemic.

In April, Abigail Disney, the granddaughter of Walt Disney’s brother, expressed dismay at the company’s decision to lay off thousands of low-paid workers after paying executives millions of dollars.

“WHAT IS THE REAL F *** ????? Abigail Disney tweeted.

Billionaire Dan Loeb last week called on Disney to cut its annual $ 3 billion dividend. Loeb, an activist investor who heads the Third Point hedge fund, urged Disney to shift resources to the company’s fast-growing streaming service.

In May, Disney announced that it would not pay a dividend for the first half of its fiscal year due to the disruption caused by the pandemic. The company has not said whether it will pay a dividend for the second half of the year.

Compensation practices under surveillance

Warren paid tribute to Disney for continuing to provide health care benefits to workers on leave for the past six months. However, she argued that in the years leading up to the crisis, Disney “prioritized the enrichment of executives and shareholders,” decisions that “weakened Disney’s financial cushion and its ability to retain and to pay its frontline workers in the midst of the pandemic ”.

For example, the letter says that Disney paid more than $ 338 million in total compensation to its 20 top executives in the three years leading up to the health crisis. Warren cited a summary of SEC filings made by Disney.

Disney CEO Bob Chapek agreed earlier this year to take a 50% pay cut and executive chairman Bob Iger agreed to forgo the rest of his salary.

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However, Warren said base salaries are a small portion of Disney’s overall executive compensation, which typically includes lucrative stock rewards.

In August, Deadline reported that Disney had ended temporary pay cuts that had been imposed on thousands of executives due to the pandemic. Warren demanded to know if this report is correct.

“Thousands of laid-off employees will now have to worry about how to keep their feet on the table as executives start receiving big paychecks again,” the senator wrote.

California and Florida Theme Park Layoffs

Like other entertainment companies, Disney theme park activity has come under fire from the pandemic. Disney World, the company’s Florida resort town, closed in March and began a phased reopening in July. However, Disneyland and California Adventure remain closed indefinitely due to state health restrictions.

“As you can imagine, a decision of this magnitude is not easy,” Josh D’Amaro, president of Disney Parks, wrote in a note about the mass layoffs. “We have cut expenses, suspended capital projects, laid off our cast members while continuing to pay benefits, and changed our operations to run as efficiently as possible, however, we just cannot stay fully staffed. in staff while operating at such a limited capacity.

In the company’s public statement on the layoffs, D’Amaro partially blamed California “for not wanting to lift restrictions that would allow Disneyland to reopen.”

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In his letter to Disney, Warren took issue with the company’s comments on California.

“While your company has blamed your decision to lay off thousands of workers on public health measures in California, which were implemented to prevent the spread of COVID-19 and save lives,” Warren wrote, “by of 6,400 of the employees you laid off are actually in Florida. ”

Warren cited a September 29 letter written by a Disney executive to regulators in Florida warning of layoffs in the state that will begin in early December.

Warren asked that “no later than” October 27, Disney provide answers to a series of questions, including whether the company will provide health care coverage for laid-off workers and how it will decide which employees to let go.

Frank Pallotta of CNN Business contributed to this report.

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