When Walt Disney Chief Executive Michael
Eisner decided his earlier appointment of then president Michael Ovitz
was a luxury the company could no longer afford – he fired him with a
$140 million severance package after just 15 months in the job. Nice
sacking if you can get it!

It not only raised industry
eyebrows at such largesse towards the one-time “most powerful man in
Hollywood” when Ovitz was once super agent to the stars, but left
Disney investors very unhappy. So in a shareholder lawsuit that has
taken more than seven years to reach court, Ovitz, Eisner and several
current or former directors are being sued in the Delaware Court of
Chancery for return of the money to Disney. Local News Corp investors
will note with interest the location state of this action.

As
Associated Press reported when the trial began earlier in November:
“the lawsuit 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
non-fault termination that entitled him to the massive severance
package when he left in December 1996”. Legal opinion believes that how
much the board of directors knew about Ovitz’s employment agreement and
when, is a key issue in the case.

According to Eisner’s
pretrial testimony, he fired Ovitz as his second in command because the
former agent failed to make the transition to corporate executive.
Ovitz was a co-founder of the Creative Artists Agency (CAA), which
represented many of Hollywood’s biggest stars and grew its reputation
by matching up star client actors and directors with ready made
projects.

Now as Bloomberg reports
on the latest from the trial, former Disney director Richard Nunis has
testified how he deferred to Eisner’s decision to fire Ovitz with the
$140 million severance package. It’s also worth noting before the two
fell out – that Ovitz and Eisner were good friends.

“It
was reason enough for me that the chief executive had decided he had to
make a change,” said Nunis, a former executive who oversaw Disney’s
theme parks.

Bloomberg also reports that having retired
from Disney in 1999 after 44 years with the company, defence lawyers
“may use Nunis’s testimony to buttress claims that Disney’s board
deferred too much to Eisner on personnel matters and didn’t examine
whether Ovitz deserved the severance.

You can read the full Bloomberg report here.

How the most powerful man in Hollywood became its most hated

But
this landmark case is not only helping lift the lid on senior Disney
management decision making and the stewardship of Eisner particularly
who has been the target of not only disgruntled investors but even
former Disney board members including Walt’s nephew Roy Disney, but
once more returns Michael Ovitz to the spotlight.

After
declaring in an infamous 2002 Vanity Fair interview that his business
demise was due in no small part to the movie business being unduly
controlled by a “gay Mafia”, he more than opened up a can of worms. It
could be said the fall out still reverberates today, even all the way
to the White House. During this year’s presidential election campaign
there was a strong push coming from the White House that a liberal-gay
Hollywood lobby was at the forefront of support for the Kerry ticket.

Among
those Ovitz blamed in the magazine, was Barry Diller (one time Murdoch
studio boss), then chairman of Vivendi Universal Entertainment. Upon
learning from a reporter in advance of the Ovitz interview alleging he
was the victim of a gay Hollywood Mafia ganging up on him, Diller was
said to have responded. “Wow. He said that on the record? Wow… Wow.
I’m stunned. I’m stunned.”

So what was behind this
extraordinary homophobic attack by Ovitz in publicly venturing into
territory most mainstream media chose to tiptoe around for decades?
Some time ago I came across an extraordinary article arising out of
this original Ovitz invective that offered a remarkable sampling of
journalistic opinion and articles that had from time to time dealt with
the degree to which Hollywood over the decades has tried to keep its
shades drawn. If not in Hollywood among those in the business itself,
then certainly in Smallville, USA! Even today as the article discusses,
the point is made that being a gay movie star or pop singer is a recipe
for box office poison, Elton John not withstanding!

You can read this amazing “just how gay is Hollywood” journalistic cornucopia here.

But in among the veritable smorgasbord of outrageous comment and
toxic name calling by Ovitz arising from his Vanity Fair article, you
have to go a long way to find a more vituperative reaction to his
feeling hard done by, than that provided by another notorious
Hollywood/music biz head kicker.

Jeff Wald (once married to and manager of Australian Helen Reddy of
‘I Am Woman Fame’), makes abundantly clear how he would never have
employed Ovitz if he was running Disney.

“I started attacking him in 1990 when they were calling him
the most powerful man in the business. I called him a jerk. And for him
to be so disingenuous to blame a gay mafia, please. Blame yourself and
your fucking hubris.” But Wald also didn’t really believe there was an
actual gay Mafia as such either.

“There’s a generation
running Hollywood, all of whom come from the same backgrounds, from the
William Morris mailroom and places like that. [Ovitz] is a fucking
asshole. He’s not talented at the end of the day. He was all about the
wrong things and he’s getting it in the ass like he deserves. He’s done
nothing right since he left CAA. He fucked partners at CAA. He fucked
them all. He lied to them. He did everything wrong for them and his
clients. Then he did a shitty job at Disney. Then he invested in an
internet business that tanked. Then he fucked around with the NFL and
cost LA from having a team. He started this AMG (Artists Management
Group) which was a fucking joke. It’s all about his incompetence,
stupidity and venality.”

In an earlier Christian Science Monitor article after the trial
opened, the paper said that apart from “offering glimpses behind
often-closed corporate doors, it is also framing an increasingly
important legal question: how to delineate and enforce lines of
responsibility between boards and CEOs”. It said there are in fact
around 200 similar lawsuits filed each year “questioning the decision
making of boards and managers over actions that have sent company stock
prices plummeting”.

“This trial will likely become famous in helping to define and
articulate this standard,” says Daniel Posin, a law professor at Tulane
University. “How careful is ‘careful enough?'”

You can read this CSM article here.

For
those with a more professional interest in the Ovitz parachute lawsuit,
the case is filed as the Walt Disney Co., No. C.A. 15452, Court of
Chancery, Wilmington, Delaware.