Substantial savings anticipated but experts question whether move is necessary.
As Disney theme parks and hotels remain closed in Europe and the US, the company will suspend the pay of more than 100,000 employees, nearly half of its workforce. The move is estimated to save Disney up to $500m a month.
In a contrast to other large multinational companies that have taken the decision to forgo state aid in a show of solidarity with taxpayers, Disney staff will be reliant on state benefits, although it is believed that executive-bonus schemes and a $1.5b dividend payment due in July are to go ahead.
Disney has raised debt and signed new credit facilities over the past month, leaving the company with resources of about $20b to draw upon, leading to speculation that it could afford to not furlough staff.
A prolonged shutdown of theme parks and hotels is anticipated, an area of Disney’s business that makes up nearly half of all operating profits ($7b n in operating income). Disney shares have fallen by a quarter since the outbreak of the virus.
Disney will provide full healthcare benefits for US staff placed on unpaid leave and has encouraged employees to apply for federal support available through the coronavirus stimulus package.
Salary payments also will be stopped for most of the 17,000 staff at Disneyland Paris, who will be placed on France’s “partial activity scheme” in which the government covers up to 84% of net salary. However, Disney will not top up the government support.
In order to “better enable the company to weather the extraordinary business challenges,” executive chairman Bob Iger has sacrificed the remainder of his $3m base salary for the rest of the year, while Bob Chapek, who recently replaced Iger as chief executive, will forgo 50% of his $2.5m base salary. However, their shortfalls will be supplemented by the protected incentive schemes, which account for most of their remuneration. Bob Iger earned $65.6m in 2018 and $47m last year, while this year, Bob Chapek could potentially earn an annual bonus “of not less than 300%” of salary, in addition to a long-term incentive award of “not less than $15m.”