Score one for 'Machiavellian' Mouse
Subtext of Ovitz decision not very flattering for Eisner
A legal decision in the decade-old Michael Ovitz trial vindicated the Disney board, but the subtext consisted of an unusually indignant attack on the Disney CEO.
Disney announced its third-quarter results Aug. 9, with ABC and ESPN driving a 16% boost in media-networks revenues to $3.4 billion.
That same day, Judge William B. Chandler III issued a ruling that Eisner, Disney chairman George Mitchell and the rest of the board would not have to reimburse the Mouse for the $140 million paid to Ovitz as severance -- a cloud dogging Eisner for a decade -- and in particular since the trial ended last January.
That's the good news.
But then here come da judge: Chandler used the opportunity to call Eisner "Machiavellian" and "imperial" and to chastise him for setting a rotten example for corporate America.
The verdict was a win for Eisner but "the fine print was not very flattering," John Fox, labor partner for Mannatt Phelps & Phillips in Palo Alto, tells Variety.
The 180-page ruling, including the detailed rebuke, will stand as a blueprint for future cases in Delaware Chancery Court, a specialized business court.
The ruling sets up "a real dichotomy between what the law will permit and what the public expects -- that his conduct met legal standards but was not satisfying from a 'best practices' perspective," Fox says.
The Ovitz payout, after just 18 months on the job, enraged shareholders, who accused Eisner of hiring his friend for the job and shipping him off with bags of cash when it didn't work out.
Not so, said the judge. Ovitz was a superstar and Eisner needed a successor. But styles and personalities clashed and things went sour fast. The payout was part of Ovitz's contract.
Given bitter salvos in court documents and testimony, Chandler is convinced Eisner and his chief counsel Sandy Litvack hated Ovitz so thoroughly by the end that they would have gone to great lengths to fire him for cause if there was any possible legal justification.
He says no one involved in the hiring and firing was more than "ordinarily negligent." But the massive payoff looked bad -- and the judge blamed Eisner.
"Eisner stacked his (and I intentionally write "his" as opposed to the company's) board of directors with friends and other acquaintances," Chandler wrote, meaning they were willing to accede to his wishes and not truly independent.
He added "a reasonably prudent CEO" would not have acted in as unilateral a manner as did Eisner.
Ouch!
Eisner's been at Disney for two decades -- the first of which is widely regarded as a golden era for the company. When he took over, it was worth $2 billion; now it's got a market cap of $53 billion. Revenue has ballooned to $30 billion from $1.5 billion.
But his last few years in office have been colored by pitched public battles, two embarrassing books (one, "Disney War," mostly about him; the other, "Camp," written by him) and the emergence of suave CEO-elect Bob Iger whose quick peacemaking with Roy Disney and Steve Jobs' Pixar pretty much confirms that the outgoing chief exec's prickly personality was bad for business.
Eisner will step down as CEO Sept. 30, after 21 years, and last week's fiscal and legal results assure him of some memorable parting gifts: a hefty bonus and a legacy of legal rebuke.
The subtext: "OK, you've done some great stuff over the years, now get out."
