DisneyWar.

• Author: Rosen, Kenneth M.
• Position: Book review

DISNEYWAR. By James Stewart. New York: Simon & Schuster. 2005. Pp. xi, 534. $29.95.

INTRODUCTION

American business executives are under fire. Recent, notorious difficulties at companies such as the Enron Corporation brought attention to these individuals. Notwithstanding the conclusion of the trials of some of those top executives, (1) skepticism remains about the inner workings of U.S. corporations and the quality of corporate governance.

Drawing special scrutiny from some quarters is the compensation granted to corporate officers and directors. (2) For instance, the timing of certain stock option grants, a key component of some compensation packages, raised ire because of those options' supposed backdating and fortuitous proximity to increases in share prices. (3) Further, some questioned more generally the high level of executive compensation. (4) Such concerns arose at the same time that the United States Securities and Exchange Commission ("SEC") promulgated new rules related to executive compensation (5) that leave some pondering whether additional action is necessary. (6) Ultimately, issues related to compensation raise a more fundamental question--are directors and officers running corporations for their own benefit or for the benefit of shareholders?

Although recent corporate scandals attract special attention to fundamental corporate governance issues, long before the recent allegations of executive excesses, corporate governance controversies arose at one of America's supposedly most wholesome companies, the Walt Disney Company. James B. Stewart's (7) DisneyWar describes this strife in the company that Walt built. Although Stewart's book was written for a wide audience and has been especially heralded in the business literature, (8) legal scholars similarly should note the work's significance.

DisneyWar tells the story of the corporation during the long tenure of the company's former chairman and chief executive officer, Michael Eisner. In studying that tenure, Stewart provides great insight into corporate governance at the company He does so through examples of critical events over a multi-decade time horizon, as Eisner's tenure as CEO lasted from 1984 until 2005. (9) For instance, Stewart describes circumstances surrounding the hiring and termination of a variety of Disney executives and includes details about those executives' compensation. Importantly, he also describes the role of shareholders and shareholder rights at the company.

The book not only offers insight into the world of the Hollywood glitterati, but illustrates the significance of a chairman and CEO to the running of a modern corporation as well as his relationship to shareholders and those the company employs. Of particular interest in the Disney narrative is the termination of former Disney executive and supposed Eisner favorite Michael Ovitz, which offers a primer on management crises and issues related to executive compensation, including benefits packages and severance awarded to departing employees. Also fascinating is Stewart's account of the events surrounding the resignation of Roy Disney, Disney founder Walt Disney's nephew and former chairman of Walt Disney Animation, from the company. After resigning his position, Roy Disney helped lead a Disney shareholder revolt that arguably contributed to Eisner's departure from the company and that continues to resonate in discussions of corporate governance reform.

Not surprisingly, the book's tale of recent years at the Walt Disney Company directly links to a legal narrative. For example, the Ovitz departure underlies years of shareholder derivative litigation that will be familiar to many corporate law students. (10) And Roy Disney's departure and other problems at the company became a catalyst for some shareholders' rejection of the corporate management team through the use of traditional corporate law mechanisms, such as the annual meeting. Accordingly, in reviewing the book for this essay, I explain why DisneyWar can be particularly useful for discussion in business law classes and how the book offers more general insights into corporate law policy-making.

In Part I, I proffer the significance of an interdisciplinary approach to business law teaching, especially given the current emphasis on such an approach in business law scholarship. I observe that interdisciplinary teaching tools are more effective when those tools utilize the power of narrative to tell students a comprehensible story about business law issues. Part II extracts from DisneyWar specific examples that might be used in the classroom with respect to executive compensation and shareholder rights. Finally, in Part III, I conclude with an explanation of how the utility of DisneyWar can extend beyond classrooms to assist corporate law scholars and policy-makers in formulating corporate law policy, particularly in the current corporate governance environment.

1. A CASE STUDY OF STUDIED CASES

   Effective courses in the business law curriculum must venture beyond solely teaching legal principles. Many law students possess little experience with businesses, although their practices after graduation often will focus on transactions or disputes involving businesses. The business law curriculum should be transformed to train students better for this type of practice. More traditional legal education emphasizes the study of court cases, yet absent a basic sense of how businesses actually function, cases on corporate governance can be unintelligible for many students. The way to engage students in discussions of how businesses actually operate is by telling stories about how real businesses work--and those stories may be found in nontraditional teaching materials, such as DisneyWar, drawn from the business arena rather than the legal world.

   1. Utilizing the Interdisciplinary Model of Corporate Law Scholarship in Teaching

      One of the defining characteristics of modern corporate law scholarship is the utilization of an interdisciplinary approach. (11) Numerous scholars are working vigorously to eliminate barriers between law, business, and economics departments at universities. This goes beyond scholars simply paying lip service to work in other disciplines to include active participation in joint scholarly projects. A casual observation of new articles in academic journals or working papers on research networks plainly reveals these efforts. (12) To facilitate such efforts, professional organizations have arisen to formalize the relationship between scholars in different disciplines. (13)

      Of course, this spirit of cooperation is hardly new. Interdisciplinary research is part of a broader tradition in the legal academy. Indeed, I previously observed the significance of such research in the development of the modern system of legal education, particularly as that system prepares lawyers to be future leaders and agents of social change. (14) The provision of interdisciplinary materials to business law students is entirely consistent with this tradition--including the introduction of journalistic-style case studies of businesses, such as DisneyWar. (15)

      Given the general significance of interdisciplinary research to corporate law, it is particularly important to encourage students at an early stage to seek out such materials as they approach legal problems. It is insufficient for professors merely to recite to students the results of empirical research papers or the contents of other related materials. Those students must familiarize themselves directly with such materials. When they join the bar, those same students' personal consultation of these types of materials could be critical to the provision of effective counsel; indeed, such consultation might be viewed philosophically as a professional obligation. (16) This results from the fact that such materials likely will inform both the creation of new legal policies and the arguments utilized in the litigation of existing policies that affect legal clients. Moreover, students sometimes fail to realize that good business lawyering involves the provision of the type of counsel that can only be achieved through a deep understanding of clients' business models. (17) Such an understanding requires willingness to study nontraditional and initially unfamiliar sources of information on businesses. DisneyWar represents an example of such an information source that, due to its direct, journalistic style, is accessible even to students without business backgrounds. (18)

   2. Stewart's Cast of Characters

      Rendering DisneyWar especially accessible is its use of the narrative form. Stewart essentially weaves his multi-decade description of the Walt Disney Company's inner workings into a story. The potential benefits from the use of storytelling and narratives in legal pedagogy are well documented. (19)

      Moreover, the power of narrative as a teaching tool perhaps helps to explain the long-standing use of the case method in law school. (20) To some degree cases offer stories from which students can derive legal principles and ascertain factors that affect the application of the law. Yet as currently deployed by many law school textbooks, these narratives are arguably flawed. Typical textbooks contain excerpts from opinions rather than full judgments and the records that support them. Facts included might be limited to the legally necessary facts, i.e., those most directly linked to a holding and arising during a fairly limited time period. Moreover, textbook authors may abridge cases and the facts contained therein to focus on only some of the legal issues before a court. In essence, students only get part of the story from the cases they read. If law schools are interested in training effective legal counselors, such as transactional lawyers who must craft a legal structure for a deal, it is important to challenge students to look beyond limited legal issues to a bigger, more detailed...