Associated Press
Witness: Disney Panel Didn't Review Draft
11.08.2004, 02:11 PM
A draft employment agreement for former Walt Disney Co. President Michael Ovitz wasn't distributed to compensation committee members when they approved the initial terms of his employment in September 1995, an ex-Disney director testified Monday.
In his fourth day on the stand, Irwin Russell, who was chairman of the compensation committee during Ovitz's tenure, said he had reviewed the draft agreement before the committee's meeting on Sept. 26, 1995, but didn't feel it was necessary for other members of the committee to do so. Instead, the committee reviewed an "abstract" of the agreement's terms.
Russell, who was Disney Chief Executive Michael Eisner's personal lawyer at the time, said none of the other committee members was a lawyer and it would have been a waste of the members' time to review the agreement itself. He noted that Disney's lawyers and Ovitz's representatives still were sparring over final language for the agreement.
Ovitz, Eisner and several current and former directors are being sued in the Delaware Court of Chancery over a $140 million severance package paid to Ovitz when he left Burbank, Calif.-based Disney after 14 months as the entertainment giant's second in command.
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 nonfault termination that entitled him to the massive severance package when he left in December 1996.
At the same time, Russell said the compensation committee as a whole didn't review any documents created by Graef Crystal, a compensation expert who advised Russell and fellow director Raymond Watson during the negotiations with Ovitz and his representatives.
The committee approved the initial terms of Ovitz's employment at a meeting in September 1995 and approved a stock option package for Ovitz at its October 1995 meeting. The expert's findings were communicated to the other committee members verbally, Russell said.
The board of directors later awarded a payment of $250,000 to Russell for his work on the negotiations with Ovitz.
Under questioning from Seth Ridrogsky, a lawyer for the shareholders group, Russell again defended the decision not to terminate Ovitz for cause in December 1996.
"The issue of deciding good cause is one that is quite complicated," Russell said. With the information at hand, including details of Ovitz's spending, the circumstances "did not come close to meeting the standards of good cause in my opinion," Russell said.
An expert witness for the shareholders group testified earlier in the trial that Ovitz could have been fired for cause because of what he called habitual lying and excessive spending while serving as Disney's president.
Russell said the board never made a determination whether to fire Ovitz for cause. As he previously testified, Russell said Eisner instead made the determination to fire Ovitz after canvassing board members. Then, it was "management's decision to make," Russell said.
Witness: Disney Panel Didn't Review Draft
11.08.2004, 02:11 PM
A draft employment agreement for former Walt Disney Co. President Michael Ovitz wasn't distributed to compensation committee members when they approved the initial terms of his employment in September 1995, an ex-Disney director testified Monday.
In his fourth day on the stand, Irwin Russell, who was chairman of the compensation committee during Ovitz's tenure, said he had reviewed the draft agreement before the committee's meeting on Sept. 26, 1995, but didn't feel it was necessary for other members of the committee to do so. Instead, the committee reviewed an "abstract" of the agreement's terms.
Russell, who was Disney Chief Executive Michael Eisner's personal lawyer at the time, said none of the other committee members was a lawyer and it would have been a waste of the members' time to review the agreement itself. He noted that Disney's lawyers and Ovitz's representatives still were sparring over final language for the agreement.
Ovitz, Eisner and several current and former directors are being sued in the Delaware Court of Chancery over a $140 million severance package paid to Ovitz when he left Burbank, Calif.-based Disney after 14 months as the entertainment giant's second in command.
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 nonfault termination that entitled him to the massive severance package when he left in December 1996.
At the same time, Russell said the compensation committee as a whole didn't review any documents created by Graef Crystal, a compensation expert who advised Russell and fellow director Raymond Watson during the negotiations with Ovitz and his representatives.
The committee approved the initial terms of Ovitz's employment at a meeting in September 1995 and approved a stock option package for Ovitz at its October 1995 meeting. The expert's findings were communicated to the other committee members verbally, Russell said.
The board of directors later awarded a payment of $250,000 to Russell for his work on the negotiations with Ovitz.
Under questioning from Seth Ridrogsky, a lawyer for the shareholders group, Russell again defended the decision not to terminate Ovitz for cause in December 1996.
"The issue of deciding good cause is one that is quite complicated," Russell said. With the information at hand, including details of Ovitz's spending, the circumstances "did not come close to meeting the standards of good cause in my opinion," Russell said.
An expert witness for the shareholders group testified earlier in the trial that Ovitz could have been fired for cause because of what he called habitual lying and excessive spending while serving as Disney's president.
Russell said the board never made a determination whether to fire Ovitz for cause. As he previously testified, Russell said Eisner instead made the determination to fire Ovitz after canvassing board members. Then, it was "management's decision to make," Russell said.