An interesting shareholder derivative case alleging a violation of the duty of care arose out of CEO Michael Eisner’s hiring, and subsequent firing, of Michael Ovitz from his position as president of Walt Disney Co. The suit alleged that Eisner and the Disney board had violated their duty of care by hiring Ovitz (who had no previous experience as an executive of a public company in the entertainment industry), as well as when Ovitz was granted a no-fault termination.
Apart from the legality, is it ethical for a board to agree to an executive severance package when an executive is terminated for poor performance?