The BIG vote at DISNEY, plus boomerang at Under Armour, “board observer” at LKQ, and Sonos’ vote against CEO
PROXY COUNTDOWN SCRIPT
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This is Proxy Countdown. Welcome to the big show for the week of March 11, 2024 alongside my tag team partner Matt Moscardi. I'm Damion Rallis. On today’s countdown:
A boomerang CEO at a sportswear company;
A director named Joe who refuses to leave LKQ
Sonos shareholders don’t like their CEO
Qualcomm shareholders asleep at the wheel
And on The Big Vote, the boys are wrestling at Disney
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Trade Wire - BUY/SELL
Top Stories:
A Boomerang CEO alert at Under Armour: founder Kevin Plank is back at the job
Stephanie C. Linnartz, who lasted 13 months, will leave with $2.6M cash; a 2024 bonus; full vesting of her remaining sign-on equity worth $7.3M; continued COBRA benefits for 2 years; and the remaining rent on her apartment lease in Baltimore.
In connection with his appointment as CEO, Kev-Bo will hand Chair duties to Mohamed El-Erian
It’s worth noting that director Carolyn Everson has been a director at two high-profile Boomerang CEO events: Bob Iger at Disney and now Kevin Plank at Under Armour
They can’t quit Joseph Holsten at LKQ Corporation
He’s been a CEO, a director, a Vice Chair, a co-CEO, board chair, Chairman Emeritus, and now… drumroll please… a “Board observer.” He won’t vote, he won’t have fiduciary duties, but he will sit there and stare at the other directors and wink once for “vote no” and wink twice for vote “yes”
Bill Brown is the new CEO at 3M Company. He is replacing Michael F. Roman, who will be transitioning to an Executive Chair role.
The new CEO’s golden hello package is valued at $17M ($3M cash; $14M equity)
The Board also waived the mandatory retirement age of 65 years for Mr. Roman and Mr. Brown.
Comtech Telecommunications terminated CEO Ken Peterman after less than 2 years on the job for cause due to conduct unrelated to Comtech’s business strategy, financial results or previously filed financial statements.
Chief Corporate Development Officer John Ratigan will serve as interim CEO
Current director Mark Quinlan will become the new board Chair
As usual, despite being a publicly traded company, there is seemingly no obligation to tell shareholders why the hell the CEO was just fired after less than 2 years on the job.
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PROXY CAGE MATCH
In this space we usually update the 3-way Proxy Cage Match at Disney but seeing as Disney is the subject of The Big Vote this week let’s focus on a different kind of proxy cage match:
Saba Capital Management has nominated seven directors for election to the Boards of 10 BlackRock closed-end funds at their respective 2024 Annual Meetings.
Additionally, Saba filed a lawsuit against the BlackRock ESG Capital Allocation Term Trust for adopting an illegal “Entrenchment Bylaw” that deprives shareholders of their right to elect directors annually. Under the Entrenchment Bylaw, any share not voted in a contested election is counted as a vote for BlackRock.
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VOTE RESULTS TABLE
Moving over to our vote results table:
At smallcap companies:
At Natural Grocers by Vitamin Cottage, 73% of shareholders without the last name Isley voted to remove sibling directors Heather and Kemper Isley
26% of all votes at Maximus said YES to a labor rights shareholder proposal asking for a third party assessment on the Company’s commitment to freedom of association and collective bargaining rights
The Adjusted non-ESG Skeptic vote shows a majority support: 50.3%
And at Sonos, 19% voted to boot out CEO Patrick Spence
the Adjusted non-ESG Skeptic vote came to 40% AGAINST.
All other directors had high levels of support, as did Say on Pay (96%), so the takeaway is clear: Sonos shareholders don’t like their CEO
And at largecap companies, shareholders are either happy or not paying attention or rubber stamping everything management does (I call this the ‘If Blackrock jumped off the Brooklyn Bridge would you?’ proxy voting standard:
Nothing really to report at Nordson
Christopher Mapes over 10%
Or at Qualcomm
All directors high support; Jeff Henderson lowest (6% against)
Say on Pay 9% against
At Qualcomm, 88% of shareholders even voted to support two anti-shareholder proposals: one on “officer exculpation” and another on essentially muting shareholder lawsuits by allowing them to be tried in federal court and not in the state of Delaware.
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THE BIG VOTE
-Walt Disney
AGM Date: April 3, 2024
Documents
2022 Voting results
General Observations
Ownership
Institutional voting power
Vanguard 8%
BlackRock 7%
Major retail ownership - 33% retail, 0.07% insider
Performance outliers:
Overall: .396
Calvin McDonald .653
Carolyn Everson .132
EBITDA .501
Calvin McDonald .856
Amy Chang .817
Carolyn Everson .174
Michael Froman .188
TSR .457
none
Carbon .509
Calvin McDonald .885
Carolyn Everson .124
Controversies .159
Calvin McDonald .462
Board stuff
Female Power Gap 45%/42%
Industry average female influence = 14%
Diversity Power Gap 29%
Industry average diversity influence = 17%
Insider influence: 8%
Industry average 75%
Dictatorships (Media Industry Peers)
Comcast Brian Roberts 66%
Meta Platforms Zuck 74%
Netflix Reed Hastings 66%
Paramount Global Shari Redston 59%
Fox Lachlan Murdoch 81%
Amazon Jeff Bezos 67%
Alphabet Brin/Page 75%
Democracies
Apple Tim Cook 25%
Only because Steve Jobs died
Warner Brothers Discovery David Zaslav 14%
formed from WarnerMedia's spin-off by AT&T and merger with Discovery, Inc. in 2022.
WarnerMedia was established as Time Warner in 1990, following a merger between Time Inc. and Warner Communications
AT&T not controlled
This war isn’t about Disney. It’s about billionaires’ fascination with being famous and getting involved with media? In any case, Peltz wouldn’t dare go after Apple, WBD is a forever headache, and the rest are dictatorships. This is all about vanity. And Blackwells is here for some wisely spent marketing budget resulting in an inordinate amount of press
Star CEOs and one super director: this is an “offensive line” board meant to block for its CEO to do what it wants
Mary Barra GM CEO/Chair since 2014
Safra Catz Oracle CEO since 2014
James Gorman Exec Chair/former CEO (2010-2023) Morgan Stanley
Bob Iger
Calvin McDonald CEO lululemon athletica since 2018
Mark Parker Exec Chair/former CEO (2006-2020) Nike
Super Director Derica Rice: CVS, Eli Lilly, Carlyle, Bristol-Myers Squibb, Target
Connections
The day Bob won: a filing with these headlines:
Bob Iger just got the backing of Walt and Roy Disney’s heirs in the proxy fight with Nelson Peltz
Disney Heirs Line Up Against Activist Investors
Disney’s heirs snub activist investors and throw their support behind Bob Iger
Disney Family Rebukes Nelson Peltz, Praises Bob Iger in Shareholder Letter
Matt:
Company stats:
Major competitors - Netflix, Fox, etc
36% revenue from parks (70% earnings)
Stock (underperform):
YTD: 24% (v 8.5% SP)
1Y: 20.2% (v 34%)
2Y: -14.6% (v 23.1%)
5Y: -2.2% (v 83.4%)
Valuation:
Valuation: Undervalued
PE: 60s
News:
Controversies
All labor - underpayment, wage discrimination
Explains why Disney is so sensitive to their employees wrath - they have multiple class action lawsuits over labor
Wokeness
Central to the proxy fight: Disney/Fox acquistion
March 2019 close, more than doubles Disney’s reportable assets (37% of asset value is goodwill)
ISS/GL approve the deal
Horizontal merger while linear TV dies…
Board stats:
Aristocracy- majority influence is current or ex CEOs
Less than half the board are CEOs, 42% of influence
Wonderfully underperforming board - 396 batting overall
92% of the board is connected to one another through other boards, 100% of the board is connected through affiliations and boards (Council of Foreign Relations)
This puts Disney in the rarified air of just 4 or 5 US large cap companies - the most handshake bro boards in our database
Board CYA needs:
Pretty please, stock price go up
Woke needle threading
Stop acquiring shit
The proxy war:
Disney stock underperforms
Both activists targeting DIS thanks to years of TSR underperformance, no dictatorship
Reasons include Iger, poor acquisitions, DIS is not NFLX
Overall view: the board lacks skills to bring Disney forward
The “fixes”
Trian: Restore the Magic
Leverage the “flywheel” - movies, TV, merchandise, rides, video games in a circular self selling machine
Awesome IP, customer loyalty, burdened by poor acquisitions, distractions, and unspoken: wokeness
Trian campaign is some variation of MAGA for media
Disney brand used to mean “family” in the traditional American sense
Disney the company expanded the definition of family to include all flavors of family, expand the customer base
Becomes the central cog in the anti-woke movement against them - bring back the traditional family, stop being inclusive
Plan:
Corporate Governance - add Peltz and Rasulo, fix succession, align pay with performance, add board-level strategy committee
Media profitability - “Insist” on a strategy for Netflix-like margins, layoffs (“right size”) and change marketing tactics, org chart
Creative engine - add board-led review of studio operations and culture, push for new IP, digital cross promotion
Strategic focus - give investors targets, sell non-core, make digital ESPN more profitable, refine parks targets
Add Nelson Peltz and Jay Rasulo
Go back to the glory days
Blackwells: The Future of Disney
Low R&D in technology, no AR/VR/AI experience
The board lacks the skills
Blackwells’ campaign is some version of self-marketing and “AI will save you”
Plan:
Direct to consumer: sports, bundling, churn reduction,
Creative: make more Avengers movies in “asset lite” approach without major acquisitions and reboots
Technology: redo the organization chart and add a CTO at c-suite, spend more on tech R&D, add AI/VR/AR to the flywheel, improve algorithms/spacial computing, real time AI crowd management and optimizations for parks - be a tech company and say AI more
Add Craig Hatkoff, Leah Solivan, Jennifer Schell
Vote Disney: We already do everything you’ve asked better than you’ve asked it
We’re already close to winning on streaming/creativity - 6 of top 10 most streamed movies across all platforms
Sports betting with PENN (ESPN BET), bundled with Fox and WBD streaming service
Stake in Epic Games
Flywheel is awesome, and we’re better off than our other legacy competitors
Plan:
Studio focus
Streaming profitability
ESPN’s future
“Supercharge” experiences
Reality Check
Arguments revolve around two things: Disney doesn’t make shareholders enough money, and Disney sucks at manipulating humanity in a world that is doing it algorithmically
The flywheel might be a hamster wheel - legacy media doesn’t fit algorithmic present and AI future that lives on nudges, addictiveness vs. storytelling and creativity
The vast majority of the bitching really should be about succession, not performance
Pre-Chapek era Iger was a hero, Chapek succession was a masterclass in terrible (mixed with a pandemic was a cocktail for dismal), post-Chapek era Iger “underperforms”
Not one of the decks can agree on how much Disney directors have underperformed despite the activists both agreeing they underperformed
TSR numbers totally different between Trian and Blackwells
Iger individual returns:
Trian: 221% (since 2000)
Blackwells: 20.7% (since returning in 2022)
Disney:728% (both tenures)
Disney just “solve” the creativity problem - and no one can solve the anti-woke pushback and get back to “old Disney”
How old are we going? Like vaguely to openly racist and homophobic 50s-80s Disney? White family values ABC 90s-00s Disney?
Disney can’t solve the culture wars, and neither can technology
The board IS one of the most insular, they DO underperform, and they DO lack skills they need other than being friends
Proposal 1: Election of 11 Directors
Annual Elections for ALL directors? YES
Director Slate
Mary T. Barra f 62 2017 10% c
Chair and Chief Executive Officer, General Motors Company
Other Public Company Directorships: General Motors Company (2014–Present)
Votes Against Last AGM: 6%
Safra A. Catz f 62 2018 3% a
CEO, Oracle Corporation
Other Public Company Directorships: Oracle Corporation (2001–Present)
Votes Against Last AGM: 2%
Amy L. Chang f 47 2021 7% n
Former EVP, Cisco Systems, Inc; former Head of Product, Google
Other Public Company Directorships: Procter & Gamble (2017–Present)
Former Public Company Directorships: Marqeta, Inc. (2021–2022); Cisco Systems, Inc. (2016–2018)
Votes Against Last AGM: 4%
D. Jeremy Darroch m 61 2024 7% a
Former Executive Chair/CEO, Sky (owned by Comcast)
Defense against Trian
Other Public Company Directorships: Reckitt Benckiser Group PLC (2022–Present)
Former Public Company Directorships: Ahren Acquisition Corp. (2021–2023); Burberry Group plc (2014–2019); Sky PLC (2004–2018)
Votes Against Last AGM: n/a
Carolyn N. Everson f 52 2022 8% c
Former President, Instacart; former VP Meta Platforms; former exec at MTV Networks
Other Public Company Directorships: Under Armour, Inc. (2023–Present); The Coca-Cola Company (2022–Present)
Former Public Company Directorships: Hertz Global Holdings, Inc. (2016–2018)
Votes Against Last AGM: 2%
Michael B.G. Froman m 61 2018 3% n
President, Council on Foreign Relations; former Vice Chair/President, Mastercard
Other Public Company Directorships: n/a
Trian target
Votes Against Last AGM: 5%
James P. Gorman m 65 2024 6%
Executive Chair/former CEO, Morgan Stanley
Defense against Trian
Other Public Company Directorships: Morgan Stanley (2010–Present)
Votes Against Last AGM: n/a
Robert A. Iger m 72 2000 19%
CEO
CEO Disney (2005-2020); Chair Disney (2012-2021)
Executive Committee with Mark Parker
Other Public Company Directorships: n/a
Former Public Company Directorships: The Walt Disney Company (2000–2021); Apple Inc. (2011–2019)
Votes Against Last AGM: 4%
Maria Elena Lagomasino f 74 2015 13% nC
CEO, We Family Offices; former CEO JP Morgan Private Bank; former CEO GenSpring Family Offices, LLC, an affiliate of SunTrust Banks
Other Public Company Directorships: The Coca-Cola Company (2008–Present)
Trian target
Votes Against Last AGM: 9%
Calvin R. McDonald m 52 2021 6% c
CEO, lululemon athletica inc.
Other Public Company Directorships: lululemon athletica inc. (2018–Present)
Former Public Company Directorships: Sephora Americas (2013–2018)
Votes Against Last AGM: 5%
Mark G. Parker m 68 2016 12% N
Board Chair; Chair of Executive COmmittee
Former CEO/Executive Chair, Nike, Inc.
Other Public Company Directorships: NIKE, Inc. (2006–Present)
Votes Against Last AGM: 9%
Derica W. Rice m 58 2019 5% A
Former EVP, CVS Health; former CFO Eli Lilly
Other Public Company Directorships: The Carlyle Group Inc. (2021–Present); Bristol-Myers Squibb Company (2020–Present); Target Corporation (2007–2018); (2020–Present)
Votes Against Last AGM: 8%
Francis deSouza 8%
Ultimately, both activists blame the board here, and both root the issue in two things:
Board lacks skills
Bob Iger’s power and succession planning
Skills
We looked through all of Disney’s self-reported skills matrices - 2021-2024 - for the board
Two things are clear:
First - Iger and the board have avoided giving anyone with media experience influence, and generally avoids anyone with media experience at all
The entire board meets basic criteria according to proxy - finance, leadership, marketing, ops, risk, and “ESG” - but what you really have is a board that is 92% CEOs and ex-CEOs
True backgrounds are more varied - Darroch was in media, Everson worked in ad sales at media company, but every other non-Iger has no media background - only 11% of influence is media (ex Iger)
Having basically no one with direct media experience means Iger is unchallenged in what is 70% of the company spend and the heart of the “flywheel” - creative
Second - ACTUAL finance backgrounds are hard to come by, especially with the board that took out the Fox debt
Number of ibankers, bankers, finance people in 2018: Lagomasino (private banking) out of 10 directors
There were more people with backgrounds in cosmetic sales than banking when they spend 80bn on 21st Century Fox
Instead the focus then and now: sales influence, which has been above 50% for last three years, but in 2018
Blackwells is correct - the lack of future tech experience and the mix of mostly sales-related and non-media experience serves to position Iger as the only authority in the room on the vast bulk of Disney’s company revenue
But almost none of the activist nominees fix the problem
Peltz has zero media experience, just a billionaire with opinions
Rasulo was CFO at Disney - can you name a CFO who’s legacy was creative media?
Hatkoff says “deep media experience”, but his experience is entirely in real estate and as a board member at iHeartRadio, a radio subsidiary of Clear Channel - can we really call being a board member at a radio subsidiary “deep media experience”?
Schell worked at Disney in the late 90s/00s for a few years, has ACTUAL media experience
Solivan was in venture backed startups, no media
And none of them have actual tech backgrounds that Disney needs
Peltz and Rasulo, please
Solivan was founder of TaskRabbitt, her LinkedIn claims a computer science degree - but she graduated from a college that didn’t offer computer science as a major until after she left
No one has AI experience at all, Schell again is closest with production of some media-to-tech failures (anyone remember WarnerBrothers NFTs?)
Power, Performance, and Succession
First, let’s settle the performance debate for the directors using three angles:
Cap value add - we measure the influence of every director in every year, multiply it by the total change in market cap for the company boards they sit on, and tell you how much total market cap value added has happened for the director across every company
COMPANY cap value add - we can show just for the one company how much market capitalization the director is responsible for adding from 2018 on
TSR batting average - we compare director TSR every year relative to directors in the same sector and size and build a “win percentage” or “batting average” - basically showing how often a director “wins” against director peers on TSR, where a .500 director is exactly sector average
Cap value add:
As a group, Disney’s board added $13bn to Disney’s market cap at Disney… but $91bn everywhere else… meaning this board might actually be good when they have the skills necessary to be useful to the company
This compares to $32bn cap value added for boards in Movies & Entertainment industry, and better than the $11bn for all boards globally
As individuals, Iger is by far the top performer with $93bn added, and the addition of Gorman is helpful with $12bn added
As individuals on Disney? No one hold a candle to Bob Chapek, who shed $28bn in cap value, and Amy Chang and Calvin McDonald are victims of timing, but Susan Arnold oversaw $4bn in lost cap value and Maria Lagomasino lost $2.6bn herself
Worse, having Derica Rice on your board basically guarantees you shrink in size - since 2018, he’s been on four separate boards, three of which lost cap during his tenure (Target being the only exception)
40% of the board members since 2018 have had losing cap value numbers, half of which are attributable entirely to Disney - the boards have sucked at helping Disney
MEANWHILE…
Peltz has $6.3bn in cap value added, and it’s almost ENTIRELY from Procter & Gamble despite being on seven boards since 2018
Peltz would rank 6th on the Disney boards since 2018, Rasulo has -$177m to his name ranking 16th, and Hatkoff has $19m added ranking 14th - it’s not exactly replacing performance with performance?
TSR
Only 3 of the 13 directors (one of whom is DeSouza) actually rank below 400 batting average on TSR since 2018 - meaning the majority of the board is actually average
Top performer on the board now is Calvin McDonald at 633, the only above average director
Peltz is average at 494, Hatkoff is an average at 430, but Rasulo is below average at 327 and would come in AS THE WORST TSR performer on the Disney board
Overall… DISNEY is right, they are basically average, not horrible
BUT… they are the wrong board for the company
Recommendations
Vote FOR Schell
She’s the closest thing you’ll get to tech + media, it will add some activist-backed media experience Iger can’t totally ignore, and break up some of what is a 100% connected board
Vote AGAINST Peltz, Rasulo, Hatkoff, Solivan… and Mel Lagomasino
The board expansion to 12 was meant in part to dilute any potential winners here - reduce it back to 11 and get rid of what is your weakest performer on the existing team Lagomasino is highly connected, 8 years of tenure, and not value additive - and it’s a bone to the activists
Downside here - you lose most of your person diversity, but next year you absolutely have to find some non-white humans not connected to this board with finance and tech experience to put on this board
It’s shocking the the “answer” for both activists is so myopic and lame
Proposal 2: Auditor
Ernst & Young 6% NO 2023
Proposal 3: Say on Pay
14% NO in 2023
15% NO in 2022
CEO Bob Iger
2024 proxy achievements:
In fiscal 2023, we restructured the Company to restore creativity to the heart of the business. We implemented financial discipline across all of our operations, including over-achieving our target of identifying cost savings of $5.5 billion.
Mr. Iger assisted the Succession Planning Committee in ongoing leadership succession planning.
Disney was named one of “America’s Most Trustworthy Public Companies” by Newsweek and was #1 in a “Brand Intimacy Study” recognizing our power in building bonds with consumers. The Company was also named one of the “World’s Most Admired Companies” by Fortune, and Fast Company ranked Disney as one of the “Most Innovative Companies."
Media industry peers include Apple, Amazon, Alphabet, Meta Platforms
$32M
$26M equity
$10M options
$2.5M perks (security/jet)
Proposal 4: Say on Pay, part 2
Stock Incentive Plan
Proposal 5: SHP 1
Golden parachutes
Kenneth Steiner/John Chevedden
Proposal 6: SHP 2
Report on Political Expenditures
The Educational Foundation of America
Proposal 7: SHP 3
Report on Gender Transitioning Compensation and Benefits
National Legal and Policy Center
Proposal 8: SHP 4
Publication of Charitable Contributions
National Center for Public Policy Research
Proposal 9: Trian
Nelson Peltz
Current
Unilever (2022-)
Madison Square Garden Sports Corp. (2015-)
The Wendy’s Company, Chair (2007-)
Past
Janus Henderson Group (2022)
Invesco (2020-2022)
Legg Mason (2020-2022)
The Procter & Gamble Company (2020-2022)
Sysco Corporation (2020-2022)
Mondelez International (2020-2022)
Ingersoll-Rand plc (2020-2022)
Legg Mason, Inc (2020-2022)
H.J. Heinz Company (2020-2022)
Triarc Companies, CEO/Chair (1993-2007)
Triangle Industries, CEO/Chair (1983-1998)
Jay Rasulo
Disney CFO (2010-2015)
Chairman of Walt Disney Parks and Resorts Worldwide (2005-2009)
President of Walt Disney Parks and Resorts (2002-2005)
iHeartMedia (2019-)
RADIO?!
Ike Perlmutter
Not a nominee
From Disney filing:
Former Marvel exec Ike Perlmutter — whose fraught history with Bob Iger is publicly documented —owns ~79% of the shares Trian claims to represent and has collaborated with Peltz to run two consecutive proxy contests”
Perlmutter’s oversight of Marvel’s studio was severed in 2015 due to his ongoing antagonization of the creative team and vehement opposition to expanding the group’s output to films like Black Panther and Captain Marvel, which ultimately made >$1.3bn and >$1.1bn, respectively, in global box office
Perlmutter left Disney in March 2023 as part of the company’s cost reduction program
Rasulo “is also Perlmutter’s guy. He was the guy that Perlmutter wanted to take over [Disney] and Perlmutter and Bob Iger have been on the outs ever since”
When Iger told Perlmutter that Rasulo wouldn’t be COO in 2015, Perlmutter responded: “You broke my heart”
Proposal 10: Blackwells
Jessica Schell
EVP and General Manager Warner Bros. Home Entertainment (2014-2023)
Operating and strategic responsibility for digital and physical sales, marketing, creative, distribution, finance and administrative functions of the studio’s home entertainment releases.
Planning and development of Virtual Reality and IOT device businesses
Strategic PlanningStrategic Planning, The Walt Disney Company (1996-1999)
From Disney filing:
Would not be considered independent (her brother and/or entities with which he is affiliated have ongoing contractual business relationships with Disney)
Craig Hatkoff
Real Estate
SL Green director (2011-)
5% influence
Co-founded Tribeca FIlm festival with former wife Jane Rosenthal and Robert DeNiro
Leah Solivan
TaskRabbit founder
B.S., Mathematics and Computer Science, Sweet Briar College, 2001
Did not have Computer Science major until 2017
2023 SHPs
Shareholder proposal requesting a report on operations related to China: 7% FOR
Shareholder proposal requesting charitable contributions disclosure: 7% FOR
Thomas Strobhar
Shareholder proposal requesting a political expenditures report: 36% FOR
The Educational Foundation of America, represented by Rhia Ventures
2022 SHPs
Shareholder proposal requesting a report on both median and adjusted pay gaps across race and gender: 59% FOR
Anne Butterfield
DAMION:
That’s the Proxy Countdown for the week of March 11, 2024. Join us next week when we jump back into the Alternative Democracy pool... forever on the lookout for shareholder sharks, floating bandaids, and wayward directors.
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