2. Outsourcing of Critical Thinking by Corporate Boards: Developments in International Law Profs. Ashley Burrowes, PhD FCA & John E. Karayan, JD PhD

3. Duties of Boards of Directors Role of Boards Duties derive from Common Law, Statutes, & Ethics Overall: Fiduciary Duty of Due Care

4. Duties of Boards of Directors Enhanced by Company Law Enhanced By Securities Laws for publicly traded Due Care and Financial Statements

5. Excuses for Dumb Decisions Company Law waters down Common Law rules: Delaware “business judgment rule” Securities laws waters down Common Law rules: Due Care and Financial Statements SOX: mandatory 1 person on Audit Committee with minimum financial literacy (not expertise)

6. In re Walt Disney Derivative Litigation (Del. June 8, 2006) Disney CEO Eisner teams with Pres.Wells Wells dies sudden; Eisner bad heart Eisner tries to reteam with Ovitz Eisner dumps Ovitz (no-fault) after only 14 months

7. $10M per Month for Leaving Ovitz gets $130 million severance under Board-approved 5 yr employment contract remaining salary+ 7.5M/yr bonus + options “Shareholders” sue Board for breach of fiduciary duty, etc.

8. Reliance on Experts Irwin Russell Disney Director & Chair of Compensation Committee Board lead financial negotiations Wrote case study warning that terms were “extraordinary”, exceeded Disney + US standards +“raise very strong criticism” Instead of disclosure, new study

9. Reliance on Experts, Redux Exec comp. consultant Graef Crystal + Ray Watson, member Disney Comp. Committee & former Chair of Board Black Shoales spreadsheets Crystal memo: 5 year total $23.6m /year After Announce, Committee meets & gets “term sheets” only

10. “Empty Head, Pure Heart” Defense Presumption Defective Judgment excused so long as good faith/not gross negligence conflicts of interest disclosed followed process reliance on experts allowed

11. Outsourcing Critical Thinking The Disney Rule allows reliance on outside “Experts” International Dimensions: Ministry of Economic Development v Feeney and Ors (District Court, Auckland CRI-2008-044-29199, 2 August 2010) [“Feltex”]

12. An Unwelcome Export from America Feltex: ANZAC’s Enron Financial statements in public offering and subsequent periods did not meet IFRS standards: true an fair view E.g., ending balances on one not tie to other; ratio analyses shows very odd trends; defaults on long term loans required reclass to current liability Reliance on defective Ernst & Young opinions freed the Feltex Five from criminal securities charges