A former Walt Disney Co. director testified Monday that Disney Chief Executive Michael Eisner told her in a December 1996 telephone conversation that then-Disney President Michael Ovitz was being fired and was eligible for a large severance package.
Reveta F. Bowers said Eisner told her that Disney wasn't firing Ovitz for cause and intended to honor the terms of its contract with the former top talent agent. Under the terms of his contract, Ovitz could be fired for cause only if he committed gross negligence or malfeasance.
At the time, Eisner told her that it was uncomfortable in Disney's executive suite and that Ovitz "had not made the transition to the Disney culture or ethos," Bowers said.
Eisner had previously told directors at a November 1996 board meeting that Ovitz wasn't working out and he had asked Disney director Gary Wilson to speak to Ovitz about leaving the company, Bowers said.
Ovitz, Eisner and several current or former directors are being sued in the Delaware Court of Chancery over a $140-million severance package paid to Ovitz when he left Disney after 14 months as the company's president.
The shareholder derivative lawsuit, which has been in progress for more than seven years, claims Disney's board failed 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 that entitled him to the massive severance package when he left in December 1996.
The shareholders claim that Ovitz was ineffective in his job at Disney and could have been fired for cause for his excessive spending and habitual lying while at the company.
Bowers testified that she first noticed tension between Ovitz and Eisner during a cocktail party at Walt Disney World in September 1996.
Bowers said Ovitz and Eisner stayed on opposite sides of the room from each other throughout the evening, which was very different from the relationship she had observed between Eisner and the late Frank Wells, Disney's former president.
Earlier Monday, Richard A. Nunis, a former chairman of Disney's parks and resorts and a former Disney director, testified that retaining Ovitz in another position at Disney, instead of firing him as its president, would have had a "detrimental" effect on the company and its stock price.
"When you have turmoil at the top of a company, it permeates down the entire organization," said Nunis, who worked 44 years at Disney before retiring in 1999.
Eisner told him in a summer 1996 telephone conversation that Ovitz was having trouble fitting in at Disney and he was thinking about making a change, Nunis said.
Rumors were rampant at the time that Ovitz was having personality problems with other executives, he said.
Nunis said he believed it was the responsibility of Disney's compensation committee to approve Ovitz's pay package.