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Last Updated: Wednesday, 20 October, 2004, 06:40 GMT 07:40 UK
Disney's court room drama of clashing egos
Stephen Evans
By Stephen Evans
BBC North America business correspondent

Michael Eisner and Michael Ovitz
There is tension behind the smiles in the world's smiliest company
It's only right, one must suppose, that a top entertainment company like Disney should produce drama.

The difficulty is that much of Disney's best drama these days happens in court or shareholders' meetings or the boardroom.

The latest setting for a Disney epic is a courtroom in Wilmington, Delaware, the venue of choice for corporate battles because of its benign company law and its judges who understand the intricacies of both legal and corporate life.

On one side is a group of Disney shareholders angry at the severance package worth more than $100m given to Michael Ovitz ten years ago.

Mr Ovitz was recruited by the current chief executive, Michael Eisner, as his deputy and fired by him barely a year later.

On the other side is Mr Eisner and the company itself, seeking to justify the pay-out.


Already some of the documents have been made public and they reveal a drama of clashing egos behind the smiles of the world's smiliest company.

Michael Ovitz
Shareholders ask why Mr Ovitz was paid $100m by the man who fired him

A picture emerges in the documents of sharp elbows and sharper tongues.

One letter hand-written by Michael Eisner to Michael Ovitz - once friends - has already been made public (see link on the right hand of this page to read the letter):

"I believe you should resign and we should put the best possible face on it. When we talked last Friday I told you again that my biggest problem was that you played the angles too much, exaggerated the truth too far, manipulated me and others too much".

Exit not cure

Mr Eisner complained to the man he had hired: "I tried to talk to you but never could get connected.

Mickey Mouse
Disney operates in a high-profile, high ego industry

"Even on the plane, I could not get your attention. The phone was the most important thing in your life.

"You were late to almost all meetings. And often you lost your temper, to pilots, drivers, little people."

And then the knock-out punch from Mr Eisner to Mr Ovitz:

"Michael, the more I dig with you, the more truth comes out. I really am tired of giving you the second degree. You must be tired of getting it?

"You may think that so much of what I have written in this letter is petty. I know that. But the time is finally, once again, to be clear. It cannot work. And I want it to end as soon as possible. I want you to direct your energies to how to exit, not how to cure."

This may be par for the course in a high-profile, high ego industry, and if it gets the job done few would mind.

The shareholders, though, are angry about the pay-out to Mr Ovitz which they say didn't get enough scrutiny by the board and which was over-generous at their expense.

Business judgement

The tradition of the Delaware court was to try to stay out of company affairs - it's not the job of a judge, so its reasoning went, to second-guess directors and shareholders if they seemed to be acting in good faith.

Michael Eisner
Mr Eisner told his friend:" I tried to talk to you but never could get connected."

Recently, though, the Delaware court has seemed more inclined to stand up for shareholders.

Last May, though, Judge William B. Chandler III refused to throw out the case.

"The facts belie any assertion that (Disney's directors) exercised any business judgment or made any good faith attempt to fulfil the fiduciary duties they owed to Disney and its shareholders," he said.

Now, that doesn't indicate a denouement that Disney might applaud.

How the Disney dispute ended up in court

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