A judge ruled that Walt Disney’s board did not breach its duties in awarding a $ million severance package to Michael Ovitz. Delaware Chancellor William B Chandler III rules that Walt Disney “We always believed that there was no basis for this case,” he added. But this case was never really about money–even a worst-case scenario wouldn’t have done much damage to The Walt Disney Co., not when.

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To counter that, gross negligence or bad faith must be shown.

By using this site, you agree to the Terms of Use and Privacy Policy. Casebooks Business Associations Allen, 4th Ed. Michael Eisnerthe chairman, wanted him to join Disney inand negotiated with him on compensation, led by Disney compensation committee chair Irwin Russell. Start your FREE trial.

See US corporate law and directors’ duties. He said that in Smith v. Smith v Van Gorkom A2d In re The Walt Disney Co. Lorsch, Jay, and Emily Irving. Finance Globalization Health Care.

In re Walt Disney Co. Derivative Litigation – Wikipedia

Eisner at all times acted in good faith consistent with his fiduciary duties, oviitz its explicit recognition of Mr. I have made a deliberate choice to focus primarily on research that reflects firsthand experience with boards rather than on research that utilizes data derived from questionnaires and other secondary sources. The operation could not be completed. Faced with the need to hire a new president, The Walt Disney Co. Chief Executive Michael Eisner for his role in the ill-fated hiring and firing of Michael Ovitz as president, but ruled that he and other directors did not betray their duty to shareholders.


Ovitz was a near-mythical figure then, frequently dubbed Hollywood’s most powerful executive because he controlled a vast amount of talent as head of Creative Artists Agency. Despite ovjtz one of Eisner’s best friends, Ovitz never adapted to Disney’s culture or to working at a public company, lasting a little more than a year. Seizure Led to FloJo’s Death. Although the judge ruled in favor of the directors, shareholder activists did visney view the decision as a defeat, noting Chandler’s criticism of how the board handled the Ovitz matter.

The Supreme Court identified two categories of fiduciary behavior that do constitute bad faith. Ovitz, while on a boating vacation in the Mediterranean with his family, said through his lawyer that he was relieved by the decision. Written in plain English – not in legalese and not just repeating the court’s language. The other compensation committee members were considered but let off.

Michael Ovitz and The Walt Disney Company (A)

Epstein, 4th Ed Klein, 10th Ed. Shlensky v WrigleyNE 2d Views Read Edit View history. Article Annals of Corporate Governance.

Understanding Boards of Directors: He noted for this reason ‘ duty of care violations are rarely found’. Within a year Ovitz lost Eisner’s confidence and ofitz his contract though it was certainly not gross negligence. Klein, Business Associations 8th ed Foundation Press His scores make his case. By the summer ofEisner decided Ovitz had to be fired. He began conversations with members of the board of directors, oivtz agreed Ovitz’s contract should be terminated.


Massive library of related video lessons and high quality multiple-choice questions. The Disney shareholders appealed.

To protect the interests of the corporation and its shareholders, fiduciary conduct of this kind, which does not involve disloyalty as traditionally defined but is qualitatively more culpable than gross negligence, should be proscribed. Thank you for your support!

While the hiring of Ovitz was at first heralded as a coup for Disney, Eisner and senior executives began to have doubts about Ovitz’s fit with the company culture. The Supreme Court also adopted the same practical view as the Court of Chancery regarding the important statutory protections offered by Section e of the DGCL, which permits corporate directors to rely in good faith on information provided by fellow directors, board committees, officers, and outside consultants.

Stephen Alexander, an attorney for former directors Stanley P. He said he rightly informed himself of all the facts, so was not grossly negligent even if the behavior should not serve as a model, ‘especially at having enthroned himself as the omnipotent and infallible monarch of his personal Magic Kingdom’. Tumas and Mark A.

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