Monday, April 15, 2013

The Walt Disney Corporation: Marvel CEO Taking Over

Based on a paper by Abigail Couch
Summary by Abigail Couch

The Walt Disney Company is a leading family entertainment and media enterprise. For more than nine decades the name Walt Disney has been distinguished in the field of family entertainment. From their humble beginnings as a cartoon studio in the 1920s to the global corporation they are today, The Walt Disney Company continues to proudly provide quality entertainment for every member of the family across America and around the world. It consists of five business segments: media networks, parks and resorts, studio entertainment, consumer products and interactive media. The subsidiaries within these segments of the Disney Corporation include ESPN, ABC, Marvel, Touchstone, Pixar, numerous theme parks and resorts, and a variety of consumer product lines. However, one of the company’s newest merges with Marvel is causing controversy in the workplace, especially within the Disney Consumer Products division (DCP). 
Not too long ago, about three years, The Walt Disney Corporation bought Marvel and only 2 short years after the merge the company’s new corporate mindset has caused a lot of issues within the staff. Isaac “Ike” Perlmutter was the largest shareholder in Marvel and after the merge he became the second largest shareholder of the Disney Corporation, behind the Steve Jobs Trust. As the purchasing company one would presume that Disney would prevail as the higher power amongst the many subsidiaries, but Perlmutter’s strong opinion and influence on the consumer products division has proven quite the contrary. His cost-cutting, stubborn, and selfish ways has put him at odds with many of the other high powers within his department and has caused drastic changes within the consumer products division of Disney.
Around the time of the buyout Marvel had achieved great success as their movie The Avengers had just claimed a spot in the top three all-time grossing movies behind Titanic and Avatar.  The acquisition was not only about movies though, Disney planned to use Marvel’s vast library of superhero characters in every part of its business from theme parks to television shows and consumer products, adding Incredible Hulk underpants and Iron Man lunch boxes to Disney’s staple inventory of Mickey Mouse merchandise.(Garrahan) With success comes power, or at least that is what Ike must have thought as he held his ground and fought for the Marvel product lines to practically take over the Disney stores. The operating income from this division did increase about 35% from 2011 to 2012, which can be credited to the inclusion of the Marvel product lines, but this profit came at a price. Because of Perlmutter and his methods in producing this excess profit executives like Andy
Mooney and several other lieutenants resigned from the company. In fact, three female executives
hired lawyers to seek financial settlements. On top of that complaints have been filed within Disneys human resources department towards Perlmutter in regards to his treatment of fellow employees.
This isn't the first time that Perlmutter has been linked to changes within Disney. Earlier this year, he was rumored to have helped with the controversial ouster of Disney Studios head Rick Ross following the failure of the John Carter movie, with a Deadline source describing Perlmutter as "making Disney CEO Bob Iger's life miserable with back-seat managing of everything, especially Walt Disney Studios”(McMillan). Many more conflicts between Perlmutter and colleagues occurred over the years. Anne Gates, the chief financial officer of DCP, and Jessica Dunne, head of global product licensing, had run-ins with Perlmutter that were observed by other staff. Gates and Perlmutter clashed over how she organized financial reports. Perlmutter wanted her to use Marvel’s format for spreadsheets but did not ask nicely according to coworkers who said she was verbally abused by him. Dunne filed a written complaint about Perlmutter regarding a disagreement over an email she sent. Dunne told colleagues that she was frightened because a disagreement between the two led to Perlmutter allegedly saying he had a bullet with her name on it. As mentioned earlier Perlmutter likes to cut costs, which proved true when he got into a bit of racial scuffle. The first Ironman movie featured the African-American actor, Terrence Howard, as Colonel Jim Rhodes. Don Cheadle, another African-American actor, was hired for the same part in the sequel at a cheaper price. Perlmutter apparently told Mr Mooney the change cut costs. He allegedly added words to the effect that no one would notice because black people “look the same”. People who filed statements with Disney’s human resources department say managers were cautious about the claims.
     The company’s stakeholders included in this situation are the shareholders, employees, customers, and any other investors. Disney is a large corporation set up worldwide and changes in any segment can affect all of the stakeholders involved, but some more than others. These issues are not something all shareholders may be aware of. Perlmutter, being a top shareholder in the company, does have a lot of power in decision making and he let that power get the best of him. Forcing opinions on others until they chose to yield to his ways has gotten Perlmutter to the top within the company and very little has been done to stop his path of destruction. He has poorly affected the overall dynamic within the Disney Consumer Products Division as other employees or stakeholders opinions were overlooked or ignored. In fact, this behavior is what led to many of the corporate staff members leaving the company or filing lawsuits or complaints regarding Perlmutter. Other stakeholders involved are the customers. The customers are the ones that keep the DCP division going with their purchases of the products the division is working to create and sell. Customers in the store that purchase a marvel toy instead of a princess toy do not know what it took to get those marvel toys on the shelf or how their purchase could affect the dynamic of the stores. They are inflating the ego of Perlmutter without even realizing it and in a sense allowing for his verbal battery to continue getting him what he wants.
Ethics is defined as values relating to human conduct with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions. (Ethics 1). Ethics in business, or Business Ethics, is the study of proper business policies and practices regarding controversial issues. Ethics within business is often guided by law, but mostly just provides a basic framework that businesses may choose to follow in order to gain public acceptance. It is a simple concept to treat others well, so it is easily understood why Perlmutters behavior caused such controversy. It is not acceptable to talk to others in demeaning or degrading ways to begin with but especially in the workplace. For this reason it is easy to understand that Perlmutters behavior was unethical. The more difficult part is understanding why his actions are considered unethical and what should have been done about it. This can be done by analyzing this issue through the slightly different
viewpoints of the following ethical theories: Individualism, Utilitarianism, Kantianism, Virtue Theory, Social Contract theory.
The normative theory in business is known as individualism. This theory states that the only goal of business is to profit, therefore the only obligation the business has is to maximize stockholder wealth, but they must do so within the constraints of the law. (Desjardin). Perlmutter was working to increase the DCP profits with the inclusion of his new ideas for the Marvel product lines.
His efforts in increasing the DCP profits proved to be successful from 2011 to 2012 as the operating income from this division increased about 35%. That being a significant jump in income for such an already well-known company is a little questionable over the course of only one year. For Disney to have done this on their own would have been difficult, but the combination of the already existing DCP and products with the addition of Perlmutters ideas for the Marvel merchandise boosted interest and sales. All is good when it comes to making more money, unless the methods of earning that money were illegal. In this case, Perlmutter did not act in any ways that violated the law. Although it is debatable on a moral level as to whether he was right or wrong, according to the ethical theory of individualism Perlmutter was right in what he did that brought the company higher profits and in turn raised the stock value.
The next ethical theory is utilitarianism. Utilitarianism is also known as the outcome ethical theory, focusing on the maximization of happiness for all parties involved. Formally, the definition states that the company should strive to maximize the overall well-being of society (DesJardins). To be considered ethical by utilitarian standards Disney as a whole must work in an ethical manner that pleases all involved, and provide consumers with products and services that maximize their overall happiness as well. The only step within this process that did not seem to properly abide by the utilitarian way was the product development steps that involved Perlmutter. Marvel achieved great success with the release and development of The Avengers, but Perlmutter let that success get to his head. Disney is the prevailing name, power, and company in this situation because Disney bought Marvel. So why then does Perlmutter, a Marvel employee that was brought into Disney, think he is in charge? At least that is the impression his actions are giving off. Disney is not ethical by utilitarian standards for one reason, Perlmutter. He has repeatedly treated coworkers very poorly to get his ideas agreed upon and despite many complaints and lawsuits Disney’s corporate leaders have done very little to slow him down. He is on a path of destruction that is forcing any who disagree out of his way leaving their happiness hanging by the wayside. It is arguable that a successful company and department should leave these employees feeling much happier then they appear to be, but the dynamic of a workplace can seriously affect those working within it.
Adjusting to the workplace culture, whether in a new company or not, can be intensely stressful. Adapting to the various aspects of workplace culture such as the communication patterns, hierarchy, and most important working and behavioral patterns of co-workers, can be a lesson of life. Maladjustment to workplace cultures may lead to subtle conflicts with colleagues or even with superiors. In many cases office politics or gossips can be major stress inducers. A hostile workplace is generally defined as a work environment that harbors this as well as discriminatory behavior or harassment. This type of behavior does not need to affect all of its employees; only one person may need to be negatively affected by the environment for it to be considered a hostile workplace. Many believe that the offending agent has to be a boss, employee or coworker. However, anyone involved or in contact with the workplace can be considered to be an antagonist. Perlmutter is not always present with the other employees of his division as he is said to often work from his home office in Florida. Even from his home office he shook up the division dynamic through his use of offensive language and tones in emails and conversations with fellow coworkers.
.An analysis of the stakeholders themselves can be done through the virtue theory. Virtue theory is an ethical theory in which the character traits and habits are important in developing into a person who will think and act ethically. These traits and habits are defined as virtues, while their opposites are defined as vices. Vices are what inhibit a person’s rationality and relations with others. The four main virtues of character are courage, honesty, temperament and justice. Their opposites, the vices, are rashness, deceit, self-indulgence, and unfairness.
We can start the virtue theory analysis by looking at corporate in general. Perlmutter and his colleagues may be some of the highest powers within their division but they are not the highest powers within the entire corporation. It has been made clear through complaints filed with H.R. and through several lawsuits that Perlmutter is not adapting to the Disney workforce very well at all. He may be the second largest shareholder but that only accounts for about 3% of the corporation altogether. Three percent is not a whole lot so why does he think he holds such a large percent of the decision making power? Corporate is not displaying their courage; in fact they are showing the opposite, their cowardice, their cowardice to Perlmutter. It appears they are afraid to stand up for their current employees who have expressed their discomfort with Perlmutter. For this reason they are not displaying any of the virtues. They are not preserving the temperament of their workplace, being honest or helping those employees who have reached out for help to achieve the justice they want.
Corporate is not alone in their actions though. They are following the lead of the man they fear to put in his place. Perlmutter set the tone for how things would work soon after the merge and he is not letting anyone get in the way of his goals. He is indeed courageous in wanting to combine the Marvel world and the Disney world but the way is going about it is all wrong. He is being unfair to those around him with his verbal battery. He is being selfish in making sure things happen his way with no respect for others’ ideas. His disregard for others is a perfect example of his rashness. It is arguable as to whether or not he is honest. In my opinion, he is a little bit too honest, so much so that his honesty should be considered a vice.
Kantianism states that one must do what is right because it is the right thing to do, with emphasis on acting with respect towards all autonomous beings (Salazar). To be considered ethical by this standard, Disney must have had the correct motivation behind allowing Perlmutter’s actions to continue. But because the actions they allowed were not done with respect to all involved they are unethical. More importantly it is critical that the formula of universal law and the formula of humanity are applied to the analysis of this case.
The formula of universal law focuses on consistency, applied to all of the population. Disney allowed Perlmutter to act against morals and ethics and disregard the wants or needs of those he worked with. If every company allowed employees to act in these ways there would be an overabundance of workplace issues throughout all companies. A work environment such as that one is not a place where work can comfortably be done. For this reason, the actions of Disney and Perlmutter violate the formula of universal law.
The formula of humanity states that everyone must respect others’ rationality, and we should never circumvent the use of rationality in order to get something that we desire (Salazar). This means that we must never compromise another person to promote ones self-interest. In this case, Disney and Perlmutter ignored the rationality of the other members of the DCP. By allowing Perlmutter’s actions to continue the company lost many good employees and Perlmutter lost many good colleagues. If Perlmutter was put in his place and treated other employees’ rationality with respect he and Disney would not be in violation, but they are.
The Social Contract Theory involves examining the rights, duties, and virtues of the
population as well as the impact of the individuals on each other. Once all parties have been accounted for and accommodated for, an agreement or law is created. In this case the only party that was accounted and accommodated for was Perlmutter. Disney was bias towards him and tip toed around his poor behavior. Because they allowed his actions he is also in violation of the social contract theory. The rights and opinions of those he works with were completely disregarded by him so he could do and achieve what he wanted.
The actions of the Disney Corporation and Isaac “Ike” Perlmutter are considered unethical by all of the primary ethical views. Disregarding the rules of humanity and ethics, and disrespecting colleagues the way Perlmutter has is not the proper way to allow any business to function. A merge can be a tricky situation but the purchasing agent, in this case Disney Corporation, should maintain the control after the merge. That is not what Disney allowed to happen. Perlmutter came in with Marvel and forced his business plans and ideas on others to the point where they were not allowed to say no. In fact, some were even scared to say the words no to Perlmutter for fear of what he would say or do back.
This could have all been easily prevented if Disney took legal and contractual steps to maintain the workplace balance they had prior to the merge while including a new Marvel division. Marvel’s superhero’s and Disney’s princesses are two very different product lines that should have been kept separate. If Disney set Marvel up as a separate entity within the DCP they a lot of controversy over what stays and goes could have been prevented. This arrangement would have put Marvel under the power of the DCP and in a sense built a checks and balances system that would not allow any one person to be the decision maker. This would mean any and all decisions Marvel wanted to make within the DCP would be approved by the original staff. It is called Disney Corporation, not Marvel Corporation, therefore Disney and all employees who were with Disney before Marvel should have the last word.

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