Walt Disney Corporate Governance Issues

Facts of the Case

Michael Ovitz was hired by Disney Company on contract to serve for five years. His contract was, however, terminated fourteen months later. Ovitz’s termination cost the company $130 million in compensation. According to the case, the past professional and social friendships between Ovitz and Eisner motivated the hiring of Ovitz to the firm. The two had been long-term friendships before Eisner became the CEO of Disney Company. However, after he had joined Disney Company, Eisner realized that he could not get along with Ovitz. Eisner made a phone call to other members of the board explaining that he had decided to terminate Ovitz’s contract without cause. Even though the court ruled that the main problem with Disney case was from the composition of the case study, other issues revolving around Eisner’s role as the CEO of the company contributed to wrongful hiring and termination of Ovitz’s contract at the company. Corporations have to learn from the mistakes of Eisner and Disney's case.

Analysis

            The success of corporations depends on the form of ownership, the type of management in place, and how the role of shareholders in the decision-making process. For publicly owned corporations, the board of directors with the help of firm managers plays a significant role in matters of governance. Applying this reasoning to the case of Disney Corporation, one finds that the problem started at the governance level. According to the case study, Eisner ran the operations of the firm as personal property, in spite of his awareness of the fact that Disney Corporation was public property. According to the lecture notes (n.d.), members of the board are supposed to act independently. This was not the case at Disney Corporation. Eisner had claimed ownership of the firm and was making decisions on behalf of the firm, even though he appeared to act in good interests of the firm.

While the form of ownership of t

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