Opinion: ‘Steve Jobs Syndrome’ strikes as Disney brings back Bob Iger, but history says that’s a bad idea


Apple Computer Inc. brought Steve Jobs back to the company in 1997 and was surprisingly successful, but this has led to a “Steve Jobs syndrome” that convinces companies to bring back previously successful senior executives, even when a study academic shows that it may not be a problem. Good idea.

Walt Disney Co.’s DIS,
+6.30%
is the latest to rehire a former CEO, surprising investors with news of Robert Iger’s return to replace his handpicked successor, Bob Chapek. Follow Howard Schultz’s return to Starbucks Corp. SBUX,
+0.38%
earlier this year, when that company was facing a wave of unionization, and wondering whether Amazon.com Inc.’s AMZN,
-1.78%
The board of directors will urge Jeff Bezos to return if this company cannot break out of its current stagnation.

Wall Street was effusive in its praise of the move, with Disney shares rising nearly 6% on Monday after the news was announced. The tenor among analysts was clear in a MoffettNathanson analyst note titled “The Magic Is Back.”

“We have never hidden our affection for Mr. Iger and the work he did to build Disney into the global powerhouse it has become,” MoffettNathanson’s Michael Nathanson wrote in a note to clients on Monday. “We haven’t recommended the stock since May 2020 for multiple reasons, including concerns that former CEO Bob Chapek was wedded to a streaming strategy that didn’t make sense given today’s reality.”

More from Therese: As Netflix and Disney move into ads, will Roku look to sell?

This enthusiasm should be tempered, however, as academics believe that this type of recruitment is not successful, on average. Known in these circles as a “boomerang CEO,” one study instead shows that the returning executive may face special challenges that put them on the same footing as any new CEO.

Iger has been rehired for a two-year term to embark on an operational turnaround of the entertainment icon, a difficult task for any seasoned CEO. But according to a study published in 2020 by the MIT Sloan Management Review, a company may be unrecognizable from its exit, because business conditions differ dramatically, which may be suitable for Iger’s return.

The MIT study concluded that boomerang CEOs aren’t always the saviors Wall Street expects. “The Boomerang CEOs really acted significantly worse than other types of CEO”, was the conclusion. The authors compared data for 167 boomerang CEOs from 1992 to 2012 in the S&P Composite 1500 index and compared their tenures with 6,000 other non-boomerang CEOs.

“On average, the annual stock performance of companies led by boomerang CEOs was 10.1% lower than their counterparts from the first period. These results held true even when we compared them to other (non-boomerang) CEOs who were hired in times of crisis,” the report says.

Among some of the failed comeback attempts was Paul Allaire at Xerox Holdings Corp. XRX,
-0.52%,
The return of Twitter co-founder Jack Dorsey and Jerry Yang’s second stint at Yahoo. Shultz’s return to Starbucks and Jobs’ much-heralded return to Apple had a tactic of returning each company to its roots: in Apple’s case, Jobs focused on innovation and simplicity in his products and its line, while Shultz focused on the core principles of Starbucks that initially succeeded as a premium coffee company. Jobs also guided the development of the iPhone, arguably the most important technological innovation of the past 25 years.

In Disney’s case, Iger is returning to a strategy he largely put in place before he stepped down as CEO just before the COVID-19 pandemic and as executive chairman late last year. Since he left the company at the end of 2021, Disney shares are down about 37%, compared with a 17% drop year-to-date for the S&P 500 SPX,
-0.39%.

Read more: Disney shares soar on Bob Iger’s return as ‘perhaps the best media leader’ is back

Much of that stems from disastrous fourth-quarter fiscal results, which made it clear that Disney is relying on profits from its theme park business to fund its foray into streaming, with operating income from its media and entertainment business falling 91% during the quarter. .

Investors have also been concerned about Chapek’s overly optimistic subscriber targets, a potentially risky scenario in a down economy with a recession looming around the corner. As Morgan Stanley analyst Benjamin Swinburne summarized, Disney’s stock “already reflects the macro pressure on the parks business and does not reflect any meaningful value for Disney’s streaming business.” Specifically, Disney content is low-earning and unmonetized.”

Again, though, that’s largely a product of the strategy Iger put in place as CEO and oversaw until less than a year ago as executive chairman. The only difference is Iger’s seemingly magical ability to woo Wall Street, while Chapek’s performance on a conference call after those results sent the stock further down in after-hours trading , Iger has shown the ability to rescue stocks with his words and hints about coming. changes even in difficult times.

Iger’s return, amid so much hope and anticipation, will be clouded by a slowing economy. He will be under pressure to change a strategy he largely launched amid inflation and a possible recession he cannot control. The expectation that Iger can pull off another Steve Jobs will weigh heavily on him over the next two years, and history is not on his side.



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