Hugh Johnston
Walt DisneyAbout Hugh Johnston
Hugh F. Johnston has served as Senior Executive Vice President and Chief Financial Officer (CFO) of The Walt Disney Company since December 4, 2023; he was 62 at appointment and previously spent 34 years at PepsiCo, including CFO since 2010 and Vice Chairman since 2015 . He holds a B.S. from Syracuse University and an M.B.A. from the University of Chicago, and currently serves on the boards (Audit Chair) of Microsoft and HCA Healthcare, as well as on the board of the Peterson Institute for International Economics . Under Disney’s 2024 compensation framework, company performance improved (income before income taxes +59% YoY to $7.6B; cash from operations +42% YoY to $14.0B), though multi‑year TSR trailed the S&P 500 resulting in below‑target vesting of prior PBUs, aligning variable pay outcomes with shareholder returns .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| PepsiCo | Vice Chairman | 2015–2023 | Senior enterprise leadership alongside CFO role |
| PepsiCo | Chief Financial Officer | 2010–2023 | Led global finance; investor communication; capital structure and controls |
| PepsiCo | Led Information Technology | 2015– | Oversaw enterprise IT function |
| PepsiCo | Led Global E‑commerce | 2015–2019 | Built and scaled global e‑commerce capability |
| PepsiCo | CEO, Quaker Foods North America | 2014–2016 | Operated a major division P&L |
| PepsiCo | EVP, Global Operations | 2009–2010 | Ran global operations |
| PepsiCo | President, Pepsi‑Cola North America | 2007–2009 | Led large branded beverages business |
| PepsiCo | EVP, Operations | 2006–2007 | Enterprise operations leadership |
| PepsiCo | SVP, Transformation | 2005–2006 | Drove corporate transformation initiatives |
| PepsiCo | SVP & CFO, PepsiCo Beverages & Foods | 2002–2005 | Business unit CFO |
| PepsiCo | SVP, M&A | 2002 | Corporate development leader |
| Merck & Co. | Vice President, Retail | 1999–2002 | Commercial leadership in pharma retail |
| PepsiCo | Various finance roles; Business Planner | 1987–1999 | Progressive finance roles |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Microsoft Corp. | Director; Audit Committee Chair | Current | Public company board; audit chair |
| HCA Healthcare | Director; Audit Committee Chair | Current | Public company board; audit chair |
| Peterson Institute for International Economics | Director | Current | Policy think tank board |
Fixed Compensation
| Component | Value | Notes |
|---|---|---|
| Base salary | $2,000,000 | Per employment agreement; cannot be reduced below most recent annualized amount (subject to limited company‑wide reduction program) |
| Target annual bonus | 200% of base salary | Set annually; same plan as other senior executives |
| Target long‑term incentive (LTI) | 575% of base salary | Annual award; mix and form set by Compensation Committee |
| Initial FY2024 LTI grant (at hire) | $14,000,000 | One‑time long‑term stock unit grant aligned to FY2024 annual grant design |
| 2024 actual annual bonus | $5,750,000 | Calculated per plan factors (see Performance Compensation) |
| Sign‑on cash bonus | $3,000,000 | Subject to 12‑month clawback if voluntary departure without Good Reason |
| FY2026+ target LTI (amended) | $16,500,000 | Raised via 2nd amendment; no change to salary or target bonus |
Performance Compensation
Annual Incentive Plan (FY2024 structure and outcome)
| Metric | Weight | FY2024 target range | FY2024 actual | Payout factor |
|---|---|---|---|---|
| Adjusted Total Segment Operating Income | 50% | Target $14,469mm | $15,601mm | 156% |
| Adjusted Revenue | 25% | Target $91,502mm | $91,361mm | 99% |
| Adjusted After‑Tax Free Cash Flow | 25% | Target $8,425mm | $8,657mm | 106% |
| Financial sub‑total (weighted) | 70% | — | — | 129% |
| Other Performance Factors (OPFs) — Johnston | 30% | D&I; Synergy; Storytelling & Creativity | Individual contributions (e.g., India JV/rights agreements; real estate consolidation) | 178% |
| Final 2024 Bonus (Johnston) | — | — | — | $5,750,000 |
Notes:
- Plan construction: 70% financial, 30% OPFs; bonus payout curves from 35% to 200% of target per metric .
- Company summarized FY2024 performance improvements (income before taxes +59% YoY to $7.6B; cash from ops +42% YoY to $14.0B) .
Long‑Term Incentives (design and Johnston’s FY2024 grant)
| Element | Weight | Vesting/performance | Johnston FY2024 grant (grant date 12/15/2023) |
|---|---|---|---|
| Performance‑Based Restricted Stock Units (PBUs) | 50% | 3‑year; 50% TSR vs S&P 500; 50% ROIC (multi‑year goals) | $7,000,000 of value |
| Stock Options | 25% | 10‑yr term; vest 1/3 per year over 3 years | $3,500,000 of value |
| Time‑based RSUs | 25% | Vest 1/3 per year over 3 years | $3,500,000 of value |
Forward‑looking changes (affect FY2025–FY2027 cycles): add Adjusted EPS Growth (50% weight); keep ROIC (25%) and change relative TSR comparator to S&P 500 Media & Entertainment Index (25%) .
PBU payout track record context: For recent vesting cohorts, relative TSR was below threshold (0% for TSR halves), with ROIC portions paying below/near target; overall multi‑year PBU payouts have been below target, aligning equity value to long‑term performance .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial ownership | 6,999 Disney shares; 36,402 shares acquirable within 60 days (options/RSUs) |
| Outstanding FY2024 awards at year‑end (9/28/2024) | Options unexercisable: 109,205 (exercise $93.44, exp. 12/15/2033); RSUs unvested: 37,645 (market value $3.61mm); PBUs unearned: 65,471 (market value $6.29mm) |
| Ownership guidelines | NEOs must hold ≥3x salary within 5 years; all NEOs in compliance or within build period as of Jan 16, 2025 |
| Hedging/Pledging | Prohibited for Section 16 officers (hedging and pledging ban); equity awards subject to expanded clawback for reputational/financial harm beyond Dodd‑Frank |
| Vested vs unvested cadence | Options and RSUs vest 1/3 annually over 3 years; PBUs cliff vest at 3 years subject to performance; options have 10‑year terms |
Employment Terms
- Term and role: Employment commenced Dec 4, 2023; initial term to Dec 31, 2026; extended to Jan 31, 2029 via amendment; title Senior EVP & CFO reporting to CEO .
- Compensation mechanics: Base salary $2.0M; target bonus 200%; annual LTI target 575% of salary; target LTI raised to $16.5M beginning FY2026; no change to salary/bonus targets in 2025 amendment .
- Severance/termination (no cause or Good Reason): lump‑sum cash equal to salary for six‑month consulting period plus salary through scheduled expiration date (if later); pro‑rated bonus for year of termination; continued vesting on outstanding equity through scheduled term as if employed; extended option exercisability, subject to releases and six‑month consulting/non‑compete commitment .
- Change‑in‑control: Plan features provide acceleration upon a post‑CIC “triggering event” (termination without cause or constructive termination/good reason) per stock plan definitions; payments may be cut to avoid excise taxes under certain circumstances .
- Restrictive covenants: Non‑solicitation of employees for one year post‑termination; non‑competition during employment and during the six‑month consulting period post‑termination (scope delineated in consulting agreement) .
- Clawback and severance policy: Company‑wide clawback policy (Dodd‑Frank compliant) and plan‑level clawback for reputational/financial harm; cash severance policy caps at 2.99x salary+target bonus absent shareholder approval .
Compensation Structure vs Performance Metrics
- Annual bonus metrics (2024): 70% weighted to adjusted total segment operating income (50%), adjusted revenue (25%), and adjusted after‑tax free cash flow (25%), with increased rigor vs 2023; 30% OPFs tied to D&I, synergy, and creative/storytelling .
- Long‑term metrics: PBUs pay on 3‑year relative TSR and ROIC (moving to include Adjusted EPS Growth in 2025); TSR target at 55th percentile for target payout .
- Outcomes: Despite strong FY2024 operating and cash results, 3‑year TSR under‑performance drove below‑target PBU payouts for prior cycles, signaling tight pay‑for‑performance alignment and limited windfalls absent market outperformance .
Performance & Track Record (context during tenure)
- Disney FY2024 highlights: income before income taxes $7.6B (+59% YoY), cash from operations $14.0B (+42% YoY); streaming profitability improvements; blockbuster slate; Experiences growth .
- Long‑term equity outcomes: 3‑year relative TSR below threshold on multiple cohorts, reducing PBU payouts; FY2024 TSR approximately 19% but 3‑year relative under‑performance constrained vesting .
Investment Implications
- Pay‑for‑performance alignment: Johnston’s cash bonus leveraged to hard financial metrics and individual OPFs; equity heavily performance‑weighted (50% PBUs) with rigorous TSR/ROIC hurdles. The 2025 shift to include Adjusted EPS Growth (50%) further ties long‑term pay to earnings power, a positive for shareholder alignment .
- Retention and selling pressure: The November 2025 amendment extends term to Jan 31, 2029 and raises annual LTI target to $16.5M, with continued‑vesting protections if termination occurs on/after Dec 31, 2026 for 2025/2026 awards—reducing near‑term turnover risk and limiting forced selling pressure from vesting disruptions .
- Risk controls: Prohibitions on hedging/pledging, robust clawback provisions, and capped severance policy mitigate governance red flags; non‑solicit and tailored post‑termination non‑compete further protect franchise value .
- Alignment and ownership: While current direct holdings are modest (6,999 shares), policy requires 3x salary ownership within five years and all NEOs are in compliance or build phase; significant unvested equity and options provide forward alignment to long‑term results .