The burgeoning campaign by Disney shareholders to withhold votes from Michael Eisner in the upcoming board election will get a boost from the news reported today by the LA Times (R), which puts Eisner in a very bad light. As the story goes, Ovitz blew through over $6 million in dubious expenses reimbursed by Disney. (As I noted the other day, expense reimbursement is the new hot button executive compensation issue.) Worse yet, Eisner concluded 5 weeks after Ovitz was hired as Disney's President that Ovitz had to go, but let him hang around for months for fear Ovitz would commit suicide. Of course, Eisner then cut a deal that let Ovitz walk away with $140 million of Disney money!
The documents, filed in connection with a Delaware shareholder suit against Disney's board of directors, provide a particularly unflattering view of Ovitz, whose stratospheric spending was extravagant even by Hollywood standards. During the 15 months he worked at Disney, Ovitz burned through $6 million on personal expenses, according to the records.
But it's Eisner who stands to lose the most from the release of the documents.
Their emergence comes at a particularly inopportune time for the Disney chairman, who next week faces a challenge by some shareholders to force him from the board. In recent days, a number of state employee pension funds and two influential shareholder advisory firms have recommended against voting for Eisner's reelection as a director. On Friday, pension funds from Ohio and North Carolina joined the list.
Although Eisner's election is assured because he is running unopposed, a significant protest vote at the company's annual meeting on Wednesday could weaken him to the point where the board would feel compelled to push him aside. Company officials are privately predicting that Eisner may fail to win as much as 30% of the vote....
Ovitz, according to the study by an independent accountant, spent more than $2 million to remodel his office. At one point, he and his decorator proposed changes to the woodwork. The tab: $150,000.
It wasn't his only capital improvement. Disney also spent $48,305 on Ovitz's home screening room and $14,055 on his home office. To ensure that Ovitz motored in style, the company plunked down $99,135 to buy his BMW from his former employer.
Disney also spent nearly $80,000 on hundreds of gifts given by Ovitz to Hollywood players and others. Among the goodies: a $946 "firearm" for director Robert Zemeckis and a $200 cigar cutter for producer Al Ruddy.
The multimillionaire sought reimbursement for even small gifts: $53 in Disney baby apparel for actor Tom Cruise; $65 for Disney clothing and a pen for Oprah Winfrey; $85 in Disney items for Madonna; and $68 in videos for David Letterman's birthday.
A good many of Ovitz's expenses were compiled while he entertained at his home, according to the accountant's report. The bill was $348,445, with most of the charges exceeding company guidelines. Those charges included $179 for flowers for a breakfast with Variety Editor Peter Bart.
But Ovitz seemed to live large outside too. He billed Disney $97,868 for Los Angeles Laker basketball tickets and $33,172 at restaurants such as Matsuhisa and Chez Panisse with the likes of Cruise, Steven Spielberg and DreamWorks co-founder Jeffrey Katzenberg. At the time, Katzenberg was engaged in a legal fight with Disney over money he said he was owed.
Questions about Ovitz's emotional stability are a central point .... Eisner considered firing Ovitz after five weeks. But he didn't "because he believed being fired would be devastating emotionally to Mr. Ovitz. Instead, he decided he should wait twelve months before bringing Mr. Ovitz's employment to an end." ... "More specifically, Mr. Eisner believed that, if fired, Mr. Ovitz would commit suicide."
If I were a Disney shareholder, I'd be withholding my vote too.
