A shareholder suit brought about by outrage over the severance package paid to former President Michael Ovitz is unveiling some deep dissention in the House of Mouse, the Wall Street Journal reported.
The Walt Disney Co.'s current and former executives are the hot seat in a Delaware courtroom, defending themselves against a seven-year-old shareholder derivative lawsuit, the Wall Street Journal reported.
The suit accuses Disney's board of failing in its fiscal responsibilities by not properly scrutinizing Ovitz's employment contract when he joined the company in 1995 and then granting him a no-fault termination in 1996 that entitled him to the massive severance package when he left in December 1996, the Journal reported.
Ovitz was a powerhouse Hollywood agent, heading Creative Artists Agency, the star-building firm he founded, making $20 million to $25 million the year he left to join Disney.
Ovitz was a close friend of Disney Chief Executive Michael Eisner's for 25 years when he joined Disney-a relationship that deteriorated rapidly with Ovitz claiming Eisner didn't protect him against a corporate culture unprepared for a president from a private company. For his part, Eisner later called Ovitz a âpsychopathâ and accused him of habitual lying, the Journal reported.
The lawsuit is focused on the $140 million severance package Ovitz was paid. As a former Disney board member, Ovitz and other board members could be held personally liable if the shareholders prevail in the case, which seeks $200 million in damages-the severance package plus interest, the Journal reported, adding that any award would be covered by insurance.
"The fact is, Michael Ovitz left the very successful company he founded and managed to go to Disney," James Ellis, an attorney who works with Ovitz, told the Journal. "He entered into a valid contract, and did not get a penny more than was provided by the contract when Disney terminated it. He did nothing wrong by accepting that payment. Much of what has been said and subsequently reported has been misleading or inaccurate. Our goal, in court and elsewhere, is simply for the truth to come out. We are confident if that happens, we will prevail."