hiring and firing of Michael Ovitz, the Opinion is rife with criticism of the Disney
This outline focus on those criticisms and the lessons that directors may take from the Disney case so that they may become better stewards of the corporate franchise and avoid, or at least enable themselves to better defend against, similar claims for breach of the still murky duty to act in good faith.
GUIDING PRINCIPLES OF DELAWARE LAW
It is axiomatic that the business and affairs of a Delaware corporation are managed by or under the direction of its board of directors, 8 Del. C. § 141(a), with broad powers of delegation. Rosenblatt v. Getty Oil Co., 493 A.2d 929, 943 (Del. 1985) (“an informed decision to delegate a task is as much an exercise of business judgment as any other”). Because courts are ill equipped to engage in post hoc substantive review of business decisions, the business judgment rule “operates to preclude a court from imposing itself unreasonably on the business and affairs of a corporation.” Zapata Corp. v. Maldonado, 420 A.2d 779, 782 (Del. 1981). The business judgment rule provides that courts will presume that in making a business decision, “the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.” Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984).
The business judgment rule provides disinterested and independent directors with significant comfort that they will not be held liable to stockholders as a consequence of their business decision. In Smith v. Van Gorkom, however, the Delaware Supreme Court held a board of directors personally liable for their breach of the fiduciary duty of care in agreeing to sell the corporation to an 2