STEVE INSKEEP, host:
A judge now says it was OK to give Michael Ovitz $140 million in severance pay. The Walt Disney company approved that payment to Ovitz, who was the company's second in command until he was fired after just 14 months on the job. Some shareholders considered the severance package so irresponsible that they filed a lawsuit, which has now been decided by a Delaware court. The journalist, James B. Stewart, has been following this case and joins us now.
Good morning.
Mr. JAMES B. STEWART (Author, "Disney Wars"): Good morning.
INSKEEP: Hey, this was seen as a major test of holding corporate boards accountable for overspending on executives, but the judge apparently didn't see it that way.
Mr. STEWART: Well, it is a major test, and it's the first big case to test what a director's responsibility is post-Enron and in the Sarbanes-Oxley era. And although he did rule in favor of Disney--it was a victory for the Disney directors and a defeat for the Disney shareholders, but the judge did warn that in today's era of higher standards for corporate directors, the result might have been different had the decision to fire Ovitz been made now rather than several years ago.
INSKEEP: Does this decision vindicate Michael Eisner, who was the head of Disney at the time?
Mr. STEWART: Well, in the legal sense, yes. I would call this a legal victory but a personal embarrassment. I mean, the chancellor deciding the case actually wrote that Eisner had enthroned himself as the omnipotent and infallible monarch of his personal Magic Kingdom, which is pretty strong language from a judge. And I think the case did expose a great deal of dysfunctional, embarrassing behavior at the top of the Disney Company. Again, this is a victory in a narrow legal sense, but I don't think the judge or anyone else would ever agree that this was good corporate behavior. On the contrary.
INSKEEP: You mentioned that the judge said that standards have changed since the incidents took place in this case, so what does this mean for corporate boards today and their responsibilities today?
Mr. STEWART: Well, I'm sure they're breathing a big sigh of relief that they're not gonna be held personally responsible for much of this outrageous behavior that's gone on in corporations, but he specifically said that he was holding them to the kinds of standards that applied when the decision was made. He didn't think it would be fair to hold them to the higher standards which have come to be expected since Enron. So it is certainly not a blank check for directors to revert to the kind of a `let's go to the cocktail party and dinner and otherwise forget our responsibilities and rubber stamp whatever the CEO wants to do.' I think on the contrary, his language is quite harsh about the Disney directors' behavior, and although he's not holding them legally liable, I would read the opinion as a warning to directors today that they will be held to higher standards than the Disney directors were in this case.
INSKEEP: James B. Stewart is the author of the book "Disney Wars."
Thanks very much.
Mr. STEWART: Thank you.
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