August 09, 2005
Van Gorkom
Posted by Account Deleted

Interestingly, the Chancellor found it necessary to distinguish this case from Van Gorkom (150-54).  He observed that the Ovitz contract, though large, was still smaller in relation to the corporation than that in Van Gorkom, and therefore did not require as much board-level procedure (he notes, at 533, that a sub-executive could have spent as much money on a movie as Eisner spent on Ovitz). 

Moreover, as I anticipated, the Chancellor found that, even without formal procedure, there was at least informal discussion, and consideration of the important factors justifying hiring Ovitz and compensating him handsomely. See 153-54, 157-58, and compare paragraph 8 of my Preview.

Despite all these distinctions from Van Gorkom I wonder about that case's continued relevance.  Suppose the procedures are far worse than those in Van Gorkom, even taking into account the differing circumstances.  Wouldn’t defendants nevertheless be exonerated if there was no intentional disregard amounting to bad faith? Or is some compliance with Van Gorkom-like procedures still necessary for good faith?

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