Larry Ribstein, University of Illinois College of Law:

"This W$J overview of the Disney case puts the Eisner/Ovitz affair into perspective: a strong CEO rendered his board practically irrelevant. Left on his own, he fumbled badly.  Shareholders suffered.

There are many interesting aspects of this case, including the limits of judicial supervision under the business judgment rule, as I recently wrote, and whether this case signals a new Delaware approach to governance post-Enron.

But I wonder whether something more basic is at stake — the future of the corporate enterprise as we know it.  After all that we have seen in the last few years, can we really be optimistic that things are changing?  Consider:

–Boards will continue to be supine in the face of strong and apparently successful CEO's, who control the agenda and the information flow. 

–Judicial supervision is, at best, a blunt instrument.  This case is only now being tried, 8 years after Ovitz was fired.

–Disgruntled shareholders can sell — but at a price determined by defective governance.

–Takeovers happen — when all-powerful executives let them.

Is there a better way?  I've argued in Why Corporations? for the dismantling of the corporate entity and the greater use of partnership-type forms for publicly held business. This could be spurred by a change in the tax laws that puts more emphasis on distribution rather than retention of earnings.

Think about this in the Disney context.  Why do we need this Disney behemoth?  The brand?  Synergy? Michael Powell recently wondered "if Walt Disney would be proud," speculating on the disastrous cross-promotion of Disney's Desperate Housewives on Disney's Monday night football. Does this sort of thing make people want to go into Disney's family-oriented amusement parks?  Even the film business has gotten away from the Disney brand — Pixar was providing the meat until Eisner chased it away.

How about spinning the amusement parks into a real estate limited partnership, divesting the television properties, and focusing on the movie business?  Aside from giving Eisner less to play with over his remaining two years, what would be lost?

Of course, we need a takeover market to engineer these changes. But possibly over time the market will see the light, particularly if encouraged by the tax code." [November 23, 2004; Ideoblog has the post]