New five-year pact calls for him to become chairman next year

Bob Iger has inked a new contract that will keep him at the helm of the Disney Co. through 2016 but also outlines a CEO succession plan.

As part of the deal, Disney’s current chairman John Pepper will retire at the company’s annual meeting in March. Iger at that time will be named chairman in addition to his CEO title. By 2015, he will transition to executive chairman for a 15-month period ending June 30, 2016, during which time the board will settle on a successor as CEO.

The new pact for Iger was approved by the Mouse House’s board of directors on Thursday at a regularly skedded meeting. The board sesh came two days after the death of Disney director Steve Jobs, who was also Disney’s single-largest individual shareholder.

Iger’s long-term contract extension was not unexpected as the Mouse has had a generally strong run since he took the reins of Disney from Michael Eisner in September 2005, highlighted by the acquisitions of Pixar Animation Studios in 2006 and Marvel Entertainment in 2009. His most recent five-year contract was inked in February 2008 and was to run through Jan. 31, 2013.

“As one of the most iconic brands and preeminent companies in the world, the Walt Disney Company requires a leader with the proven ability to drive creative and financial success in a dynamic world. For more than six years, Bob Iger has proven he has that ability at the highest level,” said Pepper. “The board is delighted that the company has been able to secure the longer-term continuation of Bob’s unique blend of experience and leadership skills. His ability to bring together the many parts of Disney’s business against a clear and proven strategy, while instilling a culture of innovation, collaboration and discipline, will continue to serve the long-term interests of shareholders.”

The new Disney deal should put to rest rumors that surfaced last month of Iger’s supposed interest in running to succeed Michael Bloomberg as mayor of New York City in 2014. Iger’s reps strenuously denied that the exec had any such plans. He is expected to retire from Disney at the end of the contract.

Iger has faced criticism in the past for his eight-figure pay packages, enhanced by bonuses and stock options. The announcement of his new contract notes that his base salary will be $2.5 million and that he is “not receiving any up front equity award in connection with signing the new agreement,” though he is still entitled to annual bonuses and long-term equity incentive awards.

According to an SEC filing, Iger’s base annual salary will be “no less than $2.5 million,” an increase of $500,000 a year from the terms of his previous contract. His annual incentive bonus target is not less than $12 million a year from 2012 through 2015 (a hike from the $10 million target under his old pact), dropping to $6 million in 2016. As for his long-term equity-based incentives, the new deal sets the target at $15.5 million annually from 2012 through 2015, and $6 million in 2016.

“I’m privileged and grateful to lead the Walt Disney Company and our talented, dedicated team at this exciting time,” Iger said. “I’m committed to increasing long-term value for shareholders and am confident we will continue to do so through the successful execution of our core strategic priorities: the creation of high quality, branded content and experiences, the use of technology, and creating growth in numerous and exciting international markets.”

On Pepper, Iger added: “No CEO could have a better counselor than John — his impeccable integrity, vast experience, and knowledge and appreciation of Disney have been invaluable. I want to thank him for his many contributions, and his support of our people and our strategy including two of the company’s most significant acquisitions in recent years — Pixar and Marvel.”

Pepper has served as Disney chairman since 2007.

As for the rationale of combining Disney’s chairman and CEO posts again, after separating those roles during the last years of the Eisner regime, Disney’s SEC filing said the move was a logical way to keep Iger on board for another five years while laying out a clear process for finding his successor as CEO.

“In weighing how to structure the chairman’s role, the board took into account two related developments: the decision by Mr. Pepper to step down from the board at the next annual shareholder meeting, and the fact that Mr. Iger would be nearing the end of his existing employment agreement at that time,” Disney said in the SEC filing. “The confluence of these two events led the Board to conclude that extending Mr. Iger’s employment contract now and naming him as Chairman of the Board upon Mr. Pepper’s retirement would put in place an effective plan for the future transition of leadership that would best serve the interest of the Company and its shareholders.”

There’s no immediate word on internal candidates to succeed him in the CEO slot, though Iger has a deep bench of lieutenants that will likely vie for the post.

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