Walt Disney directors, including Chief Executive Michael Eisner, oversaw the ouster of the former president, Michael Ovitz, properly and don’t have to reimburse the company for his $140 million severance package, a judge ruled.

Delaware Chancery Court Chief Judge William Chandler III said that Disney board members didn’t violate their duties to shareholders by ratifying Mr. Eisner’s decision to fire Mr. Ovitz in a way that entitled the former Hollywood agent to severance.

Investors in Disney, the second largest American entertainment company, sought to hold Mr. Eisner and other directors financially responsible for Mr. Ovitz’s severance.

“Eisner’s actions in connection with the termination are, for the most part, consistent with what is expected of a faithful fiduciary,” Judge Chandler wrote in a 174-page opinion released yesterday. Mr. Eisner “exercised his business judgment in the manner he thought best for the corporation.”

The decision, following eight years of litigation, buttresses long-standing protections for corporate directors who are accused of deferring too much to a company’s chief executive, a partner at New York-based law firm Schiff Hardin who defends board members and companies, Robert Zito, said.

“This ruling strengthens the notion that directors who make decisions on behalf of the company in good faith are protected from liability,” Mr. Zito said before the ruling was released. “If a board member makes an informed decision to ratify what the CEO has done, that’s not going to get him in trouble.”

Shareholders will appeal the decision, one of their lawyers at New York based Milberg Weiss Bershad & Schulman, Joshua Vinik, said in an e-mail statement.

The ruling was released after the close of New York Stock Exchange trading. Shares of Burbank, Calif.-based Disney earlier rose 73 cents to $26.14, bringing the past year’s gain to 19%. The company said yesterday that third-quarter net income rose 41% to a record $851 million, or 41 cents a share, because of surging revenue at its ESPN cable-sports channel and ABC broadcast network.

A call to a Disney spokeswoman, Michelle Bergman, wasn’t immediately returned. Burbank, Calif.-based Disney has previously declined to comment on the litigation. A spokesman for Mr. Ovitz, Bernie Roswig, said he couldn’t immediately comment.

“Mr. Eisner is pleased that the court has found that he and other directors properly carried out their fiduciary duties to shareholders,” a New York-based lawyer for Mr. Eisner, Gary Naftalis, said. “We always believed there was no basis for this case.”

Judge Chandler heard the case without a jury in a three-month trial that ended in January in Georgetown, Del. The judge said he reviewed thousands of pages of transcripts and more than 1,000 exhibits before concluding that Mr. Eisner and Disney’s board didn’t violate legal duties to shareholders.

The directors’ conduct at times “fell significantly short of the best practices of ideal corporate governance,” Judge Chandler wrote in his opinion. The law, though, “cannot hold fiduciaries liable for a failure to comply with the aspirational ideal of best practices.”