Iger’s Disney Employment Contract

In a recent SEC filing, Disney disclosed that the employment contract of Bob Iger, its new CEO, provides that Iger can be terminated for cause if he, among other things, fails “to cooperate … with any investigation or inquiry into his or the Company’s business practices … including … Executive’s refusal to be deposed or to provide testimony at any trial or inquiry.”  According to this Fortune article:

What that means in English is that if Iger stonewalls an investigation (like, say, former AIG CEO Hank Greenberg) or pleads the Fifth, the board can send him packing without his golden parachute. “This clause is quite unusual,” says Stephen Fackler, an attorney at Gibson Dunn & Crutcher who’s crafted hundreds of compensation plans. “Presumably it signals the efforts of the board to establish a different sort of board-CEO relationship in the post-Eisner era.”

Click here for the full-text of Iger's  employment agreement. 

The clause likely was also motivated by the heat the Disney board took with respect to Michael Ovitz's employment agreement.  Ovitz received a parachute payment of $140 million after a 14-month stint at Disney. Shareholders sued the board claiming, among other things, that it should have terminated Ovitz for cause thus avoiding the parachute payment.  As discussed  in an earlier post, the board prevailed in the litigation and settled the suit to avoid an appeal.