The Walt Disney Case — Some Lessons On Corporate Governance
|Area||Corporate and Commercial, Corporate Finance and Securities|
Recently, Chancellor William B. Chandler III of the Delaware Court of Chancery released his decision In re: The Walt Disney Company Derivative Litigation. The case involved an attack on the Disney board of directors' approval of an executive compensation contract with Michael Ovitz, as well as its implicit approval of a non-fault termination that resulted in a large award to Ovitz (allegedly exceeding US$140 million) after barely one year of employment. This case demonstrates an extreme example of poor corporate governance and illustrates the need for a good corporate governance structure. The facts alleged in Disney arguably illustrate an extreme example of poor corporate governance — a situation where the directors did not "exercise any business judgment or make any good faith attempt to fulfill their fiduciary duties".