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Vindication — or a Narrow Escape?

Anger and disappointment. That was my first reaction to the news that Delaware's Court of Chancery had cleared the Disney board of fiduciary wrongdoing when it approved a $140 million severance package for short-lived COO Michael Ovitz. How will boards take governance more seriously, I wondered, if they don't risk major personal liability for the decisions they make?

Then I thought about it a bit more and changed my mind. I certainly don't believe that Ovitz's payment was deserved after just fourteen months of work, nor do I think that the board—at the time made up of many of Eisner's buddies—was justified in approving it. But I do think that one unintended result of the governance changes of the past few years has been to make board service so onerous that many smart, honest qualified people won't do it anymore for fear of getting caught up in a scandal they didn't create. In this context, forcing the directors to pay $200 million might have been the death knell for anyone contemplating sitting on a board. There has to be a happy medium between the clubby, asleep-at-the-wheel boards of the late 1990s and the so-scared-of-lawsuits-that-we-don't-do anything boards that may be arising today. Thoughts?

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