The Disney Decision

Originally published August 16, 2005

On August 9, 2005, the Delaware Court of Chancery issued its decision in the closely followed In re Walt Disney Co. Derivative Litigation, No. 15452 (Del. Ch. Aug. 9, 2005). Following a 37- day trial, the court entered judgment in favor of the director-defendants and against the stockholder-plaintiffs on all counts. The Court’s detailed and carefully reasoned opinion held that even Boards such as Disney’s, which "[fall] significantly short of the best practices of ideal corporate governance," are still entitled to the protections of the business judgment rule and cannot be monetarily liable provided they make decisions in good faith, "untainted by selfinterest", and "on an informed basis . . . and in the honest belief that the action taken was in the best interest of the company [and its shareholders]."