Strange Bedfellows in Disney Court Drama

18 November 2004

The acrimonious hiring and firing of Michael Ovitz by the Walt Disney Company has forged a curious alliance in the Delaware, US, court where a shareholders' lawsuit against the Disney board is being played out.

Despite the tear-jerking breakdown of their 25 year friendship, former president Ovitz and present ceo Michael Eisner have found themselves on the same side.

Eisner says although Ovitz's style and ideas turned out to be wrong for Disney, there was no specific cause to terminate his employment. He told the court Tuesday the company was obliged to honour the $140 (€108.16m; £75.76m) severance package negotiated at the start of Ovitz's ill-starred, fourteen month tenure, 1995 through 1996.

The company's board is being sued for the return of the $140m, plus $60m compensation, by shareholders who claim it was negligent in hiring Ovitz, founder of Hollywood talent agency Creative Artists, without properly scrutinizing his contract and in failing to fire him for 'cause'.

Shareholders maintain Ovitz's liberal use of his expense account and poor decision making was cause enough.

But Eisner says he approved the glamorous parties at Ovtiz's home and a $4m refit of his former friend's office.

The court heard from Eisner that other top executives threatened to leave the company because they had no confidence in Ovitz's methods.

He cited a Disney field trip to its Orlando theme park where, in true egalitarian fashion, everyone was transported in buses - except Ovitz who chose instead to travel by limousine: "The perception was that Michael Ovitz was a little elitist ... it was a bad vibe."

It eventually dawned on Eisner that perhaps Ovitz's swashbuckling personality and business style did not suit Disney's more measured approach and that his time was up.

Eisner claims he thought long and hard about how to get rid of Ovitz without paying the full package, but came to the conclusion there was no way round it and he would have to leave with the money.

The case continues.

Data sourced from Financial Times Online; additional content by WARC staff