Disney’s decision to replace Chapek with Iger makes everyone look bad

The Disney board’s decision to swap out Bob Chapek for Bob Iger as CEO may be the right one for the company’s future. But the process to get to this choice makes everyone involved look less than stellar.

No sudden CEO change is easy, but the specifics that led to Iger replacing his hand-picked successor are filled with missteps, deceit and awkwardness.

The Disney board extended Chapek’s contract for three more years on June 28.

“Disney was dealt a tough hand by the pandemic, yet with Bob at the helm, our businesses — from parks to streaming — not only weathered the storm, but emerged in a position of strength,” Disney Chairman Susan Arnold wrote in a statement at the time. “In this important time of growth and transformation, the Board is committed to keeping Disney on the successful path it is on today, and Bob’s leadership is key to achieving that goal. Bob is the right leader at the right time for The Walt Disney Company, and the Board has full confidence in him and his leadership team.”

Less than five months later, the board has decided none of the above is correct. The board could have allowed Chapek’s contract to run out in February. Instead, because it extended his contract, the company is on the hook to pay Chapek tens of millions in severance.

Further, the board will need to tell employees and investors what changed. Either Disney’s board wasn’t truthful in its confidence in June, or something so drastic has happened between now and then to change its mind. Disney’s fiscal fourth quarter results weren’t good, but Chapek also told investors streaming losses had cratered and reaffirmed the company’s direct-to-consumer products would be profitable by 2024. Reaching profitability by 2024 on streaming has been his message for the past three years.

Chapek can also validly argue he was dealt a losing hand. He took over as CEO in February 2020, just as the coronavirus pandemic started, bringing theme park attendance to a standstill. He successfully oversaw a full rebound in park attendance, so much so that he began putting in place ways to limit crowds to increase consumer happiness.

Disney+ has consistently gained subscribers the past year, often more than 10 million in a quarter, even while Netflix‘s additions plateaued. But investors turned on the growth-at-all-costs streaming narrative in January, making Disney+’s subsequent growth less compelling.

Arguably, Chapek’s biggest mistake was icing out Iger rather than making him a trusted advisor. Throughout Chapek’s tenure, he couldn’t help but be compared with the man he replaced. Three times before, Iger pushed back retirement to stay as Disney’s CEO. In that sense, it’s not a surprise he’d come back again, despite his words otherwise.

To push away Iger rather than embrace his help was always risky. It appears as though it helped lead to Chapek’s premature end as CEO.

WATCH: CNBC’s Jim Cramer and David Faber trade notes on Bob Iger’s return to Disney