Under Eisner’s direction, revenues grew from $1.5 billion to over $30 billion and ‘share price rose from approximately $57.00 per share to $71.00 per share during Ovitz's tenure’ (Stephen and Haupert, 2011), however ‘once Disney fired Ovitz, those exuberant expectations were dashed, and Disney was left worse off than before’ (Lederman, 2007/2008), which led to a court case as shareholders believed Disney had ‘many mistakes in the hiring and firing of Ovitz’ (Nashville …show more content…
The most suitable theories applicable to the issues of this case include, the Shareholder Theory, Agency Theory and Resource Dependency Theory. The primary objective of Friedman’s Shareholder Theory is to increase profits which can be seen in the issues relating to the hiring of Ovitz as it caused the ‘stock capitalization to bounce by $1 billion’ (Lederman, 2007/2008). This theory can drive CEO’s to manipulate situations to ensure profits are maximised, without any consideration of the negative impacts on other stakeholders. The primary disadvantages of the Agency Theory proposed by Alchian and Demsetz are the conflict of interest between shareholders and directors and separation of control, both of which can be seen in this case. Eisner uses his power for monetary and non-monetary benefits and acts in his own self-interest. The Resource Dependency Theory contrasts with this case, as it ‘recommends that most of the decisions be made by executives with some approval of the board’ (Academic Library.com). The board of directors were not present when Ovitz’s contract was drawn up and overall there was little input from the board, thus there is little evidence of application of the Resource Dependency …show more content…
Similar events could happen in Ireland today, however it is unlikely as the current system of corporate governance and accountability in Ireland is sufficient to deal with the majority of these issues. In 2009, Governance Metrics International ranked Ireland one of ‘the highest ranked markets’ (The Corporate Social Responsibility Newswire, 2009), with a rating of 7.44. This rating provides evidence that Ireland has a high quality of corporate governance. Ireland also adheres to principles of The UK Corporate Governance Code, which provides guidance on leadership, effectiveness, accountability, remuneration and relations with shareholders. The Cadbury report and Greenbury report provide several recommendations which should be adopted by all companies in Ireland. The recommendations included the CEO and chairman should be separate, independent directors and information regarding who sits on the remuneration committee are necessary, all of which are issues that arose in the Disney case. The Irish Companies Act 1990 established rules regarding contracts of employment of directors and various other requirements of directors, which helps to ensure accountability and transparency in