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Disney V. Ovitz Case

Decent Essays

ISSUE: Was the decision to hire and fire Ovitz purposefully exercised by the directors within the scope of the business judgment rule and their fiduciary duty of due care?

RULE: The Delaware General Corporation Law expressly empowers a board of directors to appoint committees and to delegate them a broad range of responsibilities, which may include setting executive compensation. The business judgment rule clearly states that the directors of a corporation should act in an informed and intelligent way. This includes acting on behalf of the company in their honest belief that the action that took place, was in the best interest of the company.

APPLICATION: Shareholders of Disney brought the action against Eisner and other directors stating they have breached the fiduciary duty of hiring and firing Ovitz. Eisner and other directors defended that they had complied with the business judgment rule. …show more content…

Shareholders will continue their claim that there was a failure to exercise due care, using director-by-director rather than a collective analysis of the situation. Shareholders also state that the compensation committee did not properly inform themselves of the material facts so forth being grossly negligent in approving NFT provisions of OEA. Shareholders disputed that Eisner alone wasn’t enough to authorize termination on Ovitz. Secondly, Ovitz could have been terminated with a cause, and third, the business judgment rule did not protect Disney’s NFT

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