A judge ruled on Tuesday that the Walt Disney Co. board did not breach its duties when ex-President Michael Ovitz took away $140 million in compensation when he was ousted, dealing a blow to shareholder activists seeking to hold boards responsible for their conduct.
Judge William Chandler of Delaware Chancery Court rejected arguments of Disney shareholders who said the media company should not have awarded the severance payout to Ovitz, who left the company in 1996 after 14 months on the job.
Shareholders contended that Ovitz failed miserably as Disney president and should have been fired for cause. The lawsuit asked that the $140 million payout plus interest be returned to the company, with total damages sought in the case totaling more than $260 million.
The judge said that while the board’s conduct might not have been ideal, Chief Executive Michael Eisner and other directors acted legally.
“They did not intentionally shirk or ignore their duty, but acted in good faith, believing they were acting in the best interests of the company,” he wrote.
“Are there many aspects of Ovitz’s hiring that reflect the absence of ideal corporate governance? Certainly, and I hope that this case will serve to inform stockholders, directors and officers of how the company’s fiduciaries underperformed,” the judge wrote.