The following questions deal with issues related to executive compensation:
a. What is the business judgment rule and how does it relate to executive compensation?
b. On August 9, 2005, Chancellor William B. Chandler III of the Delaware Chancery Court ruled that the directors of the Walt Disney Company acted in good faith when Michael Ovitz was hired in 1995 to be the CEO of Disney and then allowed to walk away 15 months later after being fired by Michael Eisner, the chair of the Disney’s board of directors, with a severance package valued at $130 million. Is it “fair” that Ovitz was allowed to walk away with such a lucrative severance package only 15 months after being fired? Include in your discussion what is fairness in this instance from an ethical perspective.