Disney may split CEO and Chairman posts

The NYT is reporting that Disney's board is reconsidering its refusal to split the CEO and Chairman of the Board positions, both of which are currently held by Michael Eisner. I pulled up Eisner's employment contract and confirmed my recollection that Eisner's contract purports to entitle him to hold both posts: "Executive shall be employed by Company as its Chairman and Chief Executive Officer." Under the Delaware supreme court's decision in Grimes v. Donald, 673 A.2d 1207 (Del. 1996), it seems reasonably clear that the board of directors retains the power to take away the Chairman post from Eisner despite such a contract provision. Doing so, however, would expose the board to liability for breach of contract. Eisner's employment agreement (paragraph 10) entitles Eisner to terminate his employment contract in the event he "is not elected or retained as Chairman and Chief Executive Officer and a director of" Disney. It further provides for a severance package in that event under which Eisner would get a lump sum payment equal to the present discount value of the salary due through the duration of the contract (which expires on September 30, 2006) and of specified bonuses. All stock options granted him by the company become exercisable immediately. Under Grimes, the contract would be valid, even if it is large enough to discourage the board from severing the posts (which apparently it isn't).