The Board of Directors of a company needs to have enough independent

jagguarpaw January 13, 2017 0 Comments

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Question: The Board of Directors at Disney According to Pro…

The Board of Directors at Disney

According to Prof. Aswath Damodaran (Stern School of Business, New York University), the Board of Directors of a company needs to have enough independent members in order to be able to supervise management and “uphold ethical standards”. If a Board of Directors is too timid and never challenges the CEO on critical issues like mergers and acquisitions or risk management, unethical behavior is more likely to flourish.

Look at the composition of the Board of Directors of Disney in two different years –in 1996 and in 2008– and briefly answer the following questions:

  1. Which of the two Boards is more independent from management? Why?
  2. Did the CEO also act as Chairman of the Board in 1996? And in 2008?
  3. Which of the two Boards appears to be more diverse in its composition? Why?
  4. Note that Steve Jobs, the Apple CEO, was a member of the Board in 2008. He was also Disney’s largest shareholders, owning in excess of 6% of the company. Is this good or bad from a corporate governance perspective?

The Disney Board of Directors in 1996

Insiders Outsiders
1. Michael D. Eisner: CEO and chairman of the Board 1. Reveta F. Bowers. Head of school Center for Higher Education, where Mr. Eisner’s children attended class
2. Roy E. Disney: Head of animation department 2. Ignacio E. Lozano: publisher of La Opinión newspaper in Los Angeles
3. Sanford M. Litvak: Chief of corporate operations 3. George J. Mitchell: former US Senator. Disney paid Mitchell $50,000 for consulting, and his firm received an additional $122,764
4. Richard A. Nunis: Chairman of Walt Disney Attractions 4. Stanley P. Gold: CEO of Shamrock Holdings, which manages $1 billion in funds owned by Disney
5. Raymond L. Watson: Disney chairman of Board in 1983 and 1984 5. Leo J. O’Donovan: President of Georgetown University; Mr. Eisner is a member of the board, and Disney has donated $1 million to the school
6. E. Cardon Walker: Disney chairman and CEO of Board, 1980-1983 6. Irwin E. Russell: lawyer in Berverly Hills, has Mr. Eisner as one of his clients
7. Gary L. Wilson: Disney chief financial officer, 1985-1989 7. Sidney Poitier: actor
8. Thomas S. Muphy: Former chairman and CEO of Capital Cities (bought by Disney) 8. Robert A. M. Stern: architect in New York; was paid $168, 278 for having designed several Disney projects

The Disney Board of Directors in 2008

Board members
1. John E. Pepper, Jr (Chairman) Retired chairman and CEO of Procter & Gamble
2. Susan E. Arnold President, Procter & Gamble
3. John E. Bryson Retired CEO, Edison International
4. John S. Chen Chairman and CEO, Sybase
5.JudithL. Elstrin CEO, JLabs
6. Robert A. Iger CEO, Disney
7. Steve Jobs CEO, Apple
8. Fred Langhammer Chairman, Estée Lauder
9.Alwyn B. Lewis CEO, Potbelly Sandwiches
10. Monica Lozano Publisher; La Opinión in Los Angeles
11. Robert W. Matschullat Former CFO, The Seagram
12. Orin C. Smith Former CEO, Starbuvks