Q1. (a) All the directors were appointed CEO.

He appointed his friends and acquaintance to the company

even if there was objection from the board, he simply ignored it. Eisner was very aggressive and
autocratic in his approach.

Q1. (b) An independent director is someone who doesn’t have any connection with the company
owners or related persons. The new rule states that two third of the directors should be independent
and all of them should hold $100,000 stock. This made sure that the board did not take decisions that
would lose the shareholders money and the decisions would be unbiased. This also ensures a fair
governance.

Q2. By making the directors hold $100,000 stock would make them more responsible towards
company’s decision making and putting the company’s interest first rather than any personal bias.

Q3. A smaller board helps in taking quicker decision and will be more committed and will have a sense of
ownership. It’s easier to prepare materials for a smaller board.

Q4. The question discussed here is succession planning. Succession planning is a crucial measure to
ensure that a successor is in place to carry on the work of key individuals in a business should they leave
the company in a planned or unplanned manner. This also gives the board time to find the best for the
company.

Investors in a company are also keen to know that a succession plan is in place for key directors to
ensure smooth running of business, its strategies going forward as the new leader should have the same
vision or should align with that of former director’s. A good leader at the top management would ensure
some confidence in the market.

Q5.(a) As a replacement for the post president, Eisner suggested his friend’s name even though some
directors were against it. His personal lawyer negotiated a contract with Ovitz, which gave Ovitz a heavy
compensation package. This was a classic example of bad governance were CEO used his autocratic
power and the rest of the directors were helpless. The lawyer was completely biased towards Ovitz and
did not look at benefit of the company. Also when Ovitz was relived he got a hefty severance package,
bigger than the amount if he had worked there for 5 more years.

Q5(b) Eisners package during the mid 90’s was another example of bad corporate governance. Though
the company was not performing to its best, still Eisner was getting huge payouts from the company and
also cashed in huge stocks of the company. Another such example is giving out loans without much
checks and showing large business the employees were getting huge pay cheque.

In Disney the compensation committee consisted of Eisner who stood for his interest above that of the
company’s. This is another example of bad corporate governance. A good CEO’s salary should go hand
in hand with the performance of the company.