In re Walt Disney Co. Derivative Litigation (Disney V)

Disney's board compensation committee approved an employment agreement for new president Michael Ovitz containing a non-fault termination clause, knowing that a non-fault termination could trigger a severance package worth as much as $92 million in accelerated stock options alone, on top of remaining salary, bonuses, and a $10 million termination fee — structured partly to compensate Ovitz for the $150-200 million in commissions he was giving up to join Disney. Fourteen months later, Ovitz was terminated without cause and received roughly $130 million under the package. Shareholders (plaintiffs) sued Disney's directors (defendants), alleging breach of fiduciary duty and corporate waste in approving the agreement without fully grasping its cost. The Court of Chancery ruled for the directors, finding the committee adequately informed and not acting in bad faith, which it defined as an intentional dereliction of duty or conscious disregard of responsibilities; the shareholders appealed, challenging that definition and renewing their gross-negligence and waste arguments.