Katz

Corporation to challenge certain decisions made by the board of directors in response to the acquisition of approximately 8.8 percent of Chevron’s common stock by the Pennzoil Company. The trial court found the directors’ decisions protected by the business judgment rule and granted summary judgment in favor of Chevron. The shareholders appeal. We affirm the judgment.

Statement of the Case and Facts

In early 1989, following a period in which Chevron Corporation’s annual shareholder return was somewhat lower than that of other major oil companies, Chevron began to develop a five-year plan with the goal of increasing shareholder value. By the fall of 1989, planning for the 1990-1994 business plan was in its final stages and senior management felt its chances of success were good.

Chevron’s Board of Directors (Board) at this time consisted of five management employees and seven outside directors. According to the declarations and evidence submitted in support of respondents’ motion for summary judgment, in late September and early October 1989, a number of the directors noticed unusually heavy trading of Chevron stock. Chief Executive Officer Derr formed an ad hoc…