A pair of stockholders have sued 13 current and former officers and directors of the Walt Disney Co. to bar them from paying a severance package valued at between $84 million and $130 million to departing company president Michael Ovitz.
Richard and David Kaplan, in a shareholders derivative suit filed on behalf of Disney in Los Angeles Superior Court,want the court either to declare Ovitz’s employment agreement null and void because it is a waste of corporate assets or declare that his termination was “for cause” so that he is not entitled to exercise about $46 million worth of stock options.
According to the complaint, Disney CEO Michael Eisner and the board of directors wasted Disney assets by entering “an onerous and unconscionable employment agreement with Ovitz” that included the huge severance package “for 14 months of what by all accounts was undistinguished and unproductive service.” Ovitz’s term as president began on Oct. 2, 1995, and is scheduled to end Jan. 31.
Former Creative Artists Agency head Ovitz was “an untested executive used to being the unquestioned leader of a much smaller, less diversified business” who will now be able “to leave Disney after only a brief tenure at Disney with a severance package equal to or greater than the benefits to which he would have been entitled had he served out the full term of the employment agreement” through Sept. 30, 2000, the suit said.
After Ovitz’s resignation was announced, the complaint said, Disney announced there were no plans to name a replacement as president, “thereby effectively admitting the lack of any real need for the position Ovitz had been selected to fill and Ovitz’s failure … as Disney’s president, to undertake or provide any significant services.”
According to the suit, no consideration was given to asserting that Ovitz was dismissed “for cause” so that stock options could be repudiated.
The suit also seeks unspecified compensatory damages.