Why did Eisner hire Ovitz?

Dubious and far-fetched ideas.
Aug. 16 2004 5:01 PM

Deposed

The strange hiring and firing of Michael Ovitz.

Dueling Mikes
Dueling Mikes

If there can be an opera called Nixon in China, then surely there should be one called Ovitz at Disney. The saga certainly has all the hubris and betrayal and dashed ambitions one could wish for.

Instead of an opera, we have lengthy depositions from both players, Michael Ovitz and Michael Eisner, who fell out spectacularly in 1996 after Ovitz's brief and unhappy tenure as Eisner's No. 2 man at Disney. These documents exist as part of a lawsuit currently pending in a Delaware court. Filed in 1997 by shareholders understandably upset about Disney's costly hiring and firing of Ovitz, this litigation has withstood a number of challenges from the Disney board. It's also yielded some strange fruit as present and former Disney brass has been forced to undergo lengthy interrogations. The trial is set for October.

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The depositions were taken last year and made public this spring. At that time, a few newspapers reported some juicy tidbits, like Ovitz's claim that he kept an unhappy Tim Allen from walking off the hit show Home Improvement by giving him a dinner party and a Roy Lichtenstein print. But for some reason the depositions have hardly been mined—and they make tantalizing summer reading for those who want a peek into the minds of moguls. Take it from someone who's written a book on Disney: These massive documents include the most detailed account of these two outsized personalities and their strange interlude together.

Ovitz's deposition achieves the impossible: It makes you feel sorry for him. Paired with Eisner's, it paints a picture of Hollywood "friendship" that might make one flee into the loving arms of Sammy Glick. But what the depositions don't quite do is unravel the mystery at the center of the drama: Why on earth did Eisner hire Ovitz to be his No. 2 man in the first place? Was Eisner so seriously deluded about a man whom he had known for years as to believe that he really could transform from an imperious, chilly super-agent to a successful executive in a publicly held company? Or did Eisner—consciously or not—simply seize a chance to bring the erstwhile most powerful man in Hollywood down a peg?

The depositions suggest the latter, though establishing intent is nearly impossible. Still, it's a question that remains relevant as Eisner, all these years later, hasn't moved any closer to installing a potential successor at Disney. It would seem that was never his priority.

The need for a successor was the ostensible reason Eisner hired Ovitz in 1995. Disney's No. 2 man, president and chief operating officer Frank Wells, had been killed in a helicopter crash more than a year earlier. As the litigation reveals, the job was still vacant months later when board member Ray Watson sent Eisner a memo on the subject of corporate governance. "What I'm doing now looks crazy, no president, no CFO, no treasurer," Eisner conceded in a written reply. Should he die, Eisner suggested, the board ought to approach either Ovitz or Barry Diller. He leaned toward Ovitz, he said, "because he is a hard worker, a good family man and motivated, maybe too motivated and somewhat untested." But then again, he sometimes favored Diller, who was "completely the opposite …. smarter, much more ethical."

There was no chance that Diller was going to work for Eisner or anyone else. So Eisner went with the candidate whom he considered to be untested, less smart, and much less ethical.

After he was hired, the question of Ovtiz's ethics (or lack thereof) apparently arose early and often. According to the court papers, Eisner confided a concern to Sid Bass, then Disney's majority shareholder, that Ovitz might have been less than truthful with his former partner in the agency business, Ron Meyer. According to Bass' account, Ovitz had told Meyer he was flying on a Gulfstream jet belonging to a producer (not named, but it's said to be Sydney Pollack) who insisted that he use it. The story was that Meyer had unknowingly been paying part of the plane's costs—without being able to use the plane himself. (Whether the story is in fact true remains unclear.)

It hardly seems surprising that one line of questioning focused on Ovitz's expenses. The litigation suggests Ovitz's tendency to spend was a problem from the start. According to a brief filed last month, Disney had Pricewaterhouse look into the subject after Ovitz's departure. The firm prepared a draft report that said Ovitz spent about $4.8 million during his brief time at Disney and only $690,000 of that amount was in compliance with Disney's spending guidelines. The report was neither finalized nor acted upon, according to the brief.

Ovitz said that before he was formally elected to the Disney board, he charged the company $90,000 for a star-studded party he threw at his house. "When I gave a party like this at CAA they would cost a minimum of $200,000," he said. "There is probably no one in the city of Los Angeles that could have drawn the kind of people we did to that party and do it for $90,000." But Ovitz said Disney didn't fully reimburse him for the "bargain-basement" party, prompting the question from the shareholders' lawyer, "At CAA, you would have been fully reimbursed for the party?"

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