The wonderful world of Disney (again!): Eisner, Ovitz ... and Chandler. Lessons from a 'wild ride.'.

• Author: Kaback, Hoffer
• Position: QUIDDITIES

I WRITE AGAIN about the Walt Disney Co. for a simple reason: That organization is, for a governance commentator, not just lush soil, but the Fertile Crescent, the Nile River valley, and the Indus River valley, combined.

In a relatively short span, the wonderful world of Disney has presented us with the hiring (and expensive firing) of agent Michael Ovitz as president; a class-action lawsuit brought against the Disney board for its conduct therein; the "withhold votes" campaign of Stanley Gold and Roy Disney; the search for a new Disney CEO to replace the imperial Michael Eisner; a lawsuit by Gold and Roy Disney challenging that search, and their proxy fight threat; and more.

In August, the Delaware chancellor, William B. Chandler III, issued a 174-page opinion in l'affaire Ovitz (which relates back to 1996). The chancellor's opinion is significant for directors not because it breaks new legal ground but because it contains practical analysis of the contours of board fiduciary duties, emphasizes the distinction between aspirational good governance and the conduct necessary for directors to avoid personal liability, and provides enlightening description of how the Disney board functioned.

I have long believed that, to do a better job and for their own protection, American directors should not complacently (and lazily) rely on newspaper accounts, legal memoranda, or opinion columns to inform them about important governance cases. Though good starting and ending points, they are not enough. There is no substitute for primary sources. Legal opinions, which often didactically lay out the facts, applicable legal framework, and the court's analysis, are generally accessible to the intelligent non-lawyer.

Not the least benefit to those who heed my urging to read the Ovitz opinion is that they will thereby be able to compare the Disney board's M.O. to that of the boards on which they serve. That exercise may engender relief--or convulsive shuddering.

Recognizing, however, that many directors will not do so, but simultaneously hopeful that this column may encourage the ambitious and diligent, I comment on some noteworthy aspects of the chancellor's opinion:

1. He early states a key theme: "Delaware law does not ... hold fiduciaries liable for a failure to comply with the aspirational ideal of best practices, any more than [a court in a medical malpractice case] can impose a standard of liability based on ideal--rather than competent or...