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‘Does Not Comport’
The juncture of law and board affairs comes to colorful life in the pages of the Delaware Chancery Court’s opinion in the Disney case.


In the twilight of his brilliant career in Hollywood, when he was making movies that no longer found rapt audiences or critical acclaim, film director Billy Wilder reflected philosophically, “I’ve always thought that you are as good as the best you’ve ever been.”

That comment came to me when reading Chancellor William Chandler’s opinion handed down last month in the longrunning Disney case litigating Michael Ovitz’s termination package. Here is the chancellor’s Wilder-like characterization of Ovitz: “Based upon my personal observations of Ovitz, he possess such an ego, and enjoyed such a towering reputation before his employment at the Company [Disney], that he is not the type of person that would intentionally perform poorly. Ovitz did not build Hollywood’s premier talent agency by performing poorly.”

For such keen observations of people and power in governance, the chancellor’s Disney opinion is worth a close reading, and you can read it here (Part One.  Part Two.). I’ll pull out one other passage from the opinion that makes this a compelling advisory:

“Eisner’s actions in connection with Ovitz’s hiring should not serve as a model for fellow executives and fiduciaries to follow. His lapses were many. He failed to keep the board as informed as he should have. He stretched the outer boundaries of his authority as CEO by acting without specific board direction or involvement.... [His] failure to better involve the board in the process of Ovitz’s hiring, usurping that role for himself, although not in violation of law, does not comport with how fiduciaries of Delaware corporations are expected to act.”

I had the privilege of being a fellow panelist with Chancellor Chandler in a presentation to Prof. Charles Elson’s class on corporate governance at the University of Delaware. I was impressed with the chancellor’s unassuming demeanor and his measured, thoughtful remarks that day on the juncture of law and board affairs. An excerpt from that presentation, titled “Panel Discussion: Whose Company Is It Anyhow?” is available in the Directors & Boards Articles Archive.

If you are adding the chancellor’s Disney opinion to your reference files, other thematically related gems from our archive to consider adding to your library would include:

• “Courts and Boards: The Top 10 Cases” (authored by the aforementioned Charles Elson, a member of the Directors & Boards editorial advisory board)
• “Directors & Boards Roundtable: The Legacy of Smith v. Van Gorkom”
• “Be Smart in Your Litigation Defense”
• “Incorporate in Delaware? Yes”
• “When a Grand Jury Subpoena Arrives”

Question of the Month

Last month, we asked where you saw the “Getting on a Board” process going over the next year. An overwhelming 74% of you answered that it will be “about the same” -- with the focus “still on the usual suspects” -- and 26% see the process as getting easier, i.e., that the net is truly widening for prospective candidates. No one thinks it will get any harder -- an interesting finding that speaks volumes about the current state of being on a board.  

One director added this interesting comment: “More and more board seats are going to be open to a wider circle of competent individuals as boards reduce interlocks and search for directors with more diverse skills and abilities.”

And now to this month’s question, harking back to the Disney opinion and your chance to render a “verdict”:

The Delaware Chancery Court has determined that Michael Eisner and the Disney board “did not breach their fiduciary duties or commit waste” in connection with Michael Ovitz’s hiring, termination, and severance package paid.

Do you agree or disagree with the Court?  Click here to take the survey.

Jim Kristie is the editor and associate publisher of  Directors & Boards.

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By James B. Mintz, James H. Rowe, and Michael Anthony
 

What can boards of directors do to help protect senior executives who, more often than not, are as much an asset to a corporation as its key products, brands, and technologies? What can -- and should -- it cost not to insure, but to ensure, a senior executive’s physical safety? These are among the topics being discussed by security professionals the world over.

Executive protection, properly understood and properly practiced, isn’t simple, or cheap. Once upon a time, it might have meant nothing more than hiring a bodyguard -- an ex-cop or retired FBI agent burly and intimidating enough to clear a path through a crowd of rowdy protesters or irate shareholders. Special skills required? At most, some familiarity with evasive driving, a mean karate chop, and perhaps the ability to shoot -- and license to pack -- a gun.

Today, though, corporate executives face a daunting array of threats beyond the ever-present danger of kidnap for ransom. In our gun-happy society, there is always the risk that yesterday’s disgruntled employee may morph into today’s deranged killer. Executives are sometimes viewed as symbols, and symbols can attract the attention of a variety of loonies.
  
[Click Here to Read the Entire Article]

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Editor's note:  Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today.  If you'd like to participate in this section in the future, please email Scott Chase. 

This month, WBCSD Director Margaret Flaherty answers questions about a new report, "Beyond Reporting," spearheaded by Travis Engen, president and chief executive officer, Alcan, and Samuel DiPiazza, global chief executive officer, PricewaterhouseCoopers, that sheds strategic light on this timely topic.

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September 6-9, 2005
"Corporate Governance: Effectiveness and Accountability in the Boardroom" is the theme of the program presented by the Kellogg School of Management at Northwestern University. It is designed to improve your understanding of the responsibilities of board membership and gain the skills and strategies needed to become a more effective director. Visit http://www.kellogg.northwestern.edu/execed/programs/LEAD02/index.htm for additional information.

September 8-9, 2005
The Practising Law Institute will hold Advanced Corporate Compliance Workshops in New York City and San Francisco (September 26-27, 2005). The workshops will be highlighted by "New Best Practices Sessions" covering risk assessment, educating and reporting to the board, and creating guidelines for investigating misconduct. Register online at http://www.pli.edu or call (800) 260-4754

September 8-9, 2005
NASDAQ is again co-sponsoring the University of Wisconsin-Madison and the State of Wisconsin Investment Board (SWIB) Directors' Summit. Designed for board chairs, corporate directors, senior corporate officers, general counsels, and board candidates, the summit offers a look at corporate governance from the viewpoint of institutional investors. Featured speakers include Edward S. Knight, executive vice president and general counsel of the NASDAQ Stock Market; Erroll B. Davis Jr., chairman and CEO of Alliant Energy Corp.; and Patrick McGurn, vice president of Institutional Shareholder Services (ISS). Topics include building an effective board, a NASDAQ/Reuters joint venture,  and improving the efficiency of Section 404. For more details and to register visit http://uwexeced.com/directorssummit/default.htm

September 8-9, 2005
The Yale Global Governance Forum presents "The Challenges of Global Governance," sponsored by the Yale School of Management and taking place on Yale's New Haven campus. Described by program leader Prof. Jeffrey Sonnenfeld as a "candid, intimate, and lively event," the meeting will address issues critical to an understanding of corporate governance, including "Why Do Boards Still Get Fooled?" and "Guidance vs. Meddling: The Board's Role in Corporate Strategy" For more information, call 404-760-8174 or visit http://celi.som.yale.edu

September 12-14, 2005
Society of Corporate Compliance and Ethics conducts its Fourth Annual Compliance and Ethics Institute, themed "Corporate Compliance and Ethics Programs: Case Studies and Risk Areas." It will be held at the Chicago Downtown Marriott. Case studies include Dell Inc., GE Commercial Finance, Kraft Foods, and U.S. Bancorp. To register, visit http://www.corporatecompliance.org

September 13-14, 2005
HSM Group presents "World Business Forum 2005: Leadership Speaks." The event takes place at the Radio City Music Hall in New York City. Speakers include Colin Powell, Jack Welch, Avon's Andrea Jung, and Yahoo's Terry Semel. Topics include global security, strategy and execution, and women and leadership. For more information, visit http://www.wbfny.com

September 15-16, 2005
Practising Law Institute and American Management Association, in cooperation with Society of Corporate Secretaries and Governance Professionals Inc., present the Third Annual Directors' Institute on Corporate Governance. It will be held at the PLI headquarters in New York City and available via nationwide web broadcast. Prominent topics include the role of the board, compensation and D&O liability, and the pros and cons of directorship. Key speakers include E. Norman Veasey of Weil Gotshal & Manges and New York State Comptroller Alan G. Hevesi. Register online at http://www.pli.edu

September 25-27, 2005
The Institute for Financial Excellence presents "The Sarbanes-Oxley Conference & Exposition" at the Baltimore Marriott Waterfront Hotel. The educational event will offer attendees insights and expertise from "world authorities on Sarbanes-Oxley." For more information, visit http://www.sarboxconf.com

October 5-7, 2005
The Business Education Network Summit on "Bringing Together Leaders for Effective Business Involvement in Education" will be held in Washington, D.C. Participating companies and organizations include GlaxoSmithKline, IBM, Business Roundtable, KPMG, Target, and Siemens. Topics include empowering teachers, closing the achievement gap, promoting math and science competitiveness, and building better business and education partnerships. For more information, contact the U.S. Chamber of Commerce Center for Corporate Citizenship at (202) 463-3133 or visit http://uschamber.com/events/ViewEvent.htm?eventID=409

October 19-21, 2005
UCLA's Anderson School of Management presents the "UCLA Director Training and Certification Program" at the Collins Center for Executive Education, Los Angeles, CA. The program, along with its optional committee modules, brings directors up-to-date on policies and best practices concerning SEC regulations, FASB considerations, NYSE rules, and other important issues. The curriculum combines experts with experienced directors and academic thought leaders. For more information, or to register, call (310) 206-7539 or visit http://www.execed.anderson.ucla.edu

October 23-25, 2005
The National Association of Corporate Directors (NACD) will present its 2005 Annual Corporate Governance Conference at the Renaissance Mayflower Hotel in Washington, DC. This year's theme is "Fortifying Shareholder Relations and the Public Trust." Among other issues, sessions will address how board members can close the "trust gap" by establishing proactive shareholder/stakeholder communication practices. Speakers include corporate directors and CEOs, leading professional advisers, and key regulators and lawmakers. To register or for more information, visit http://www.nacdonline.org

October 26-29, 2005
Corporate Governance LLC presents "The Governance Summit: A Thought Leadership Event for Directors of Boards," taking place at the St. Regis Monarch Beach Resort in Dana Point, Calif. A select group of board members and CEOs will explore best practices in corporate governance, departing from standard academic fare about rules, regulations, and checklists in favor of pragmatic, peer-to-peer roundtables and intimate working sessions focused on today's leading governance issues. Discussions will be moderated by board members, corporate governance advisers, regulators, and other professionals who will share their experiences and insights. More information can be found at http://www.governancesummit.com

October 28-29, 2005
The Society for Industrial and Organizational Psychology will sponsor a Fall Consortium on "Leadership at the Top: The Selection, Globalization and Ethics of Executive Talent." The event will be held at the Westin St. Louis in St. Louis, Missouri. The consortium will bring together leading-edge thinkers to focus on current issues in the selection and development of executive talent. For more information, visit http://www.siop.org/lec

October 31, 2005
CompensationStandards.com conducts its Second Annual Executive Compensation Conference, "Meeting the New Standards: What Every Director (and Advisor) Needs to Know - and Do - Now!" It will be held at the Hyatt Regency, Chicago, and via nationwide video webcast. Participating in the event are Stanford Law School's Program in Law, Economics & Business and Harvard Law School's Program on Corporate Governance, and is ISS accredited for director education. Key speakers include John Reed, Ken West, Warren Batts, Ed Brennan, Michele Hooper, and Ed Woolard. To register, go to https://www.compensationstandards.com/Conference05/

November 1-3, 2005
The National Association of Stock Plan Professionals will hold its 13th Annual Conference in Chicago at the Hyatt Regency Chicago. This conference will deliver the practical guidance that companies (as well as lawyers and advisers and those responsible for implementation and administration) will need in the days ahead to respond to the recent landmark accounting requirements, fundamental shifts in tax law, and increased scrutiny of plan practices. The conference is preceded by two one-day seminars, "The Fundamentals of Stock Plan Administration," October 30-31, and "The Second Annual Executive Compensation Conference," October 31, both located at the Hyatt Regency. For more information, or to register, call (925) 685-9271 or visit NASPP 2005 Conference at http://www.naspp.com

November 14-15, 2005
Columbia Business School for Executive Education, with support from the New York Stock Exchange Foundation Inc., presents "Accounting Essentials for Corporate Directors: Enhancing Financial Integrity." It will be held in New York City at the Rihga Royal Hotel. This program is designed to strengthen the skills and capabilities of corporate directors in evaluating the appropriateness of financial reporting and accounting decisions and representations made by management. Speakers include FASB Chairman Robert Herz and PCAOB Chairman William McDonough. Visit http://www.gsb.columbia.edu/execed For more information, contact Liz Schultz at 1-800-692-3932

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Boardroom Briefing:  Board/Shareholder Communications

Our newest Directors & Boards Boardroom Briefing, currentlly in preparation,  will look at the issue of Board/Shareholder Communications.  This edition will be published in September, and is being produced in concert with the National Investor Relations Institute.

To view our most recent Boardroom Briefings in .pdf format, click here.




A ‘Definitive Report’ on Corporate Governance
The Conference Board has issued what it calls “its most comprehensive report ever on what companies need to know -- and do -- to improve their corporate governance and compliance practices.” Dr. Carolyn Kay Brancato, the Conference Board’s research director for its Global Corporate Governance Research Center and a co-author of this “definitive” report, says that it “gives directors what they need to know about crucial developments on the legislative and regulatory front, and shows how to determine what are ‘best’ corporate governance practices and how to implement them.” Brancato has made several appearances in the pages of Directors & Boards with her wise counsel on governance practices. For more information on the report, click here.


Corporate Governance Ratings Get Broader Distribution
GovernanceMetrics International’s corporate governance ratings and research is now available over the FactSet Research Systems platform. FactSet is a leading provider of global financial and economic information, including fundamental data on thousands of companies worldwide. GMI provides ratings and research on 3,300 global companies to asset managers, pension funds, banks, insurance companies, regulatory agencies, professional advisory firms and corporations, http://www.gmiratings.com. Howard Sherman, GMI’s chief operating officer, has authored several pieces for D&B, including the much-referenced advisory, “The Retired CEO: On or Off the Board?” -- a copy available to e-Briefing readers by e- mailing editor James Kristie with your fax number.  
 
New Report on Boards of Colleges and Universities
Do you serve on the board of an institution of higher learning? Ever wonder how your board measures up? The Association of Governing Boards of Universities and Colleges (AGB) has released “Higher Education Governing Boards: Current Practices, Status, and Trends.” Based on a 2004 survey of more than 1,000 universities and colleges, this report (