Disney lawsuit lifts curtain on real-life Hollywood drama
This week CEO Michael Eisner tells a court his version of how Walt Disney Co. paid a severance package of $140 million - yes, that's for not working - to a former close friend after only 14 months at work.Skip to next paragraph
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From the testimony so far, it's a tale as packed with drama as any movie minted in the Magic Kingdom. The lawsuit by Disney shareholders has so far cast the company as a bastion of interpersonal subterfuge that would make Mickey Mouse blush.
Beyond the severance payout itself, some eight years ago, are very current concerns about Mr. Eisner's tenure. And the story goes beyond the the roller-coaster fortunes of Disney and its boss. The trial is also helping to settle some questions about the "reality" behind Hollywood dream factories and the balance of power between CEOs and the boards who hire them.
"This trial is telling us about the culture of decisionmaking" at Disney at a time when scandals have heightened concerns about corporate governance, says Georg Szalai, business editor of the Hollywood Reporter.
So far, the picture doesn't look pretty. Michael Ovitz, the former company president who got the $140 million payout, testified of Disney colleagues: "They're not particularly sensitive to human beings." He recounted projects where chief executive Eisner belittled his ideas from the top and jealous Disney executives undermined him from the bottom. Eventually, Mr. Ovitz said, "I guess you could say I got pushed out the sixth-floor window."
Mr. Eisner is telling his side of the story this week. But both, along with other Disney officials, are on the same side in the trial.
At issue is investors' allegation that the Ovitz payout deal was excessive and that his hiring was not properly scrutinized by Disney's board of directors. Also: whether Mr. Ovitz should have been fired "for cause" - averting a severance payout altogether.
Eisner told the Delaware court Monday that in 1995, the loss of a key executive and other challenges made it imperative to hire a strong deputy. Ovitz, then a talent agent whom many called "the most powerful man in Hollywood," was his choice.
But Ovitz, Eisner, and other Disney insiders never meshed. Eisner's view is that hiring Ovitz turned out to be a mistake that needed to be corrected quickly. And he said he kept fellow Disney directors fully informed of major issues such as Ovitz's hiring.
Hollywood has long been portrayed as a place where movie-set egos clash. But Ovitz painted a similarly harsh view of corner-office dealings.
In five theatrical days on the stand, he gave details of working life within Hollywood and Disney in which backbiting, infighting, and manipulation were rampant. "From the time I started in the entertainment business, every network and every studio threatened to sue every other company on a daily basis," he said.
Other witnesses had said the typical media pay package for company presidents was then $540,000. Ovitz said he took a $1 million annual salary, which "in this country is a lot of money [but] in the entertainment business it's not even a base salary for anybody."
He is not the first high-profile Disney executive to be cast aside under Eisner. Boardroom infighting in 1994 led to the departure of studio head Jeffrey Katzenberg, who won a settlement of as high as $250 million.