Firing Ovitz Was Better Than Demoting Him, Director Says

Walt Disney Co. director Gary Wilson testified Monday that allowing former President Michael Ovitz to stay on in a lesser role to avoid having to pay his severance would have hurt the company.

Wilson, the chairman of Northwest Airlines Corp., said it would have been difficult for Disney Chief Executive Michael Eisner to find another second in command if Ovitz had stayed to finish out his five-year contract. Ovitz was fired in late 1996 after a little more than one year on the job.

“It wouldn’t have been in the best interests of the company to have a high-powered executive like Michael Ovitz sitting in some corner office doing nothing,” Wilson testified in the Georgetown, Del., trial of a shareholder lawsuit seeking to recover Ovitz’s severance. “The best thing to do was to pay out the contract and not have Mr. Ovitz involved with the company anymore.”

Disney investors claim that Wilson and some former Disney directors should be held responsible for allowing Ovitz to collect a cash-and-stock severance package that plaintiffs’ lawyers value at more than $140 million.

Wilson, who served as Disney’s chief financial officer from 1985 to 1989, told Delaware Chancery Court Judge William Chandler that he started hearing rumors of problems between Eisner and Ovitz in early 1996. He got a firsthand look at the rift when he went on a bike trip in France with the two men in June of that year, he said.

Conversations with the two indicated that Ovitz was having trouble being accepted by other Disney executives and that he hadn’t earned the respect of his colleagues, Wilson said.

By the fall of 1996, Eisner asked Wilson to talk with Ovitz during a vacation and persuade him to step down, the Disney director said.

Wilson and Ovitz owned a boat together, and their families were planning to sail in the Caribbean over Thanksgiving, Wilson said.

During the trip, Wilson said, he was able to convince Ovitz that it would be better for him and the company if the former agent agreed to leave. Ovitz’s departure was a “very tender subject,” Wilson said.

Ultimately, Ovitz “got the message” that he couldn’t salvage his position at Disney, no matter how hard he worked, Wilson said.

Earlier, Father Leo J. O’Donovan, former president of Georgetown University and a Disney director, testified that he believed Eisner had the power to fire Ovitz without seeking board approval.

O’Donovan, a Catholic priest, said he believed that Eisner had the final say on personnel matters and that if he decided an executive like Ovitz should be ousted, the chief executive “had the authority” to fire him.