Walt Disney Co. chief executive Michael D. Eisner had been on the witness stand for about half an hour on Monday when the subject of former Disney president Michael S. Ovitz finally came up.

Did he know Mr. Ovitz, Eisner's attorney asked.

"I've heard of him," Eisner said, sending a wave of laughter through the courtroom.

Ovitz and his quarter-century relationship with Eisner are at the center of a high-profile shareholder lawsuit over Ovitz's $140 million severance package being heard here.

Eisner, wearing a dark suit and green tie dotted with Mickey Mouse ears, took the stand Monday afternoon, beginning highly anticipated testimony that is expected to last several days

Under friendly questioning from his attorney, Gary P. Naftalis, Eisner sketched the outlines of his defense of Ovitz's hiring. He testified that he regularly kept Disney directors informed about management actions both through formal board meetings and informal conversations. Shareholders who brought the suit say Eisner slipped Ovitz's hiring, and the exact details of his contract, past an uninformed board.

Eisner said he and other Disney directors believed Ovitz's hiring was critical in 1995 because Eisner was recovering from a heart attack, Disney President Frank G. Wells had recently died in a helicopter accident and the company had just purchased the ABC television network, making an already complex company even more difficult for Eisner to manage without a strong deputy. Plaintiffs, for their part, say Ovitz's hiring was foolish because the powerful talent agent had no executive experience at a large, publicly traded company.

Eisner also sought to rebut the plaintiffs' contention that Ovitz's hiring and lucrative departure were the product of wink-and-nod deals between best buddies. Eisner on Monday denied that he and Ovitz were "best friends." Ovitz testified earlier that Eisner was his closest friend for 25 years and that he was devastated when Eisner cooled on him at Disney.

Eisner said Ovitz had engaged in "hyperbole" about their friendship. "We're talking semantics here," he said, asked if they were best friends. "Michael Ovitz had a lot of best friends. I was a good friend, a reasonable friend."

Disney shareholders filed the suit seven years ago, arguing that Eisner and other Disney directors breached their duty to investors by hiring Ovitz with little formal deliberation and then allowing him to walk away with a severance package worth about $140 million when he left the company 14 months later.

The plaintiffs are asking that Eisner and other directors, including Ovitz, be forced to repay Disney the $140 million plus about $60 million in interest. If the shareholders win, corporate governance experts say, it could set a major precedent, possibly opening board members at companies across the nation to similar lawsuits for failing to keep close tabs on executive compensation.

Of his interactions with board members, Eisner testified, "My strategy was a constant fill-in, an over fill-in. It's not easy when you have 13, 15 or 16 bosses, but I have found ways to do it." He said he would constantly talk to directors at public Disney events. "We celebrated everybody's birthday, from Mickey to Pluto, so we were always together."

Eisner said there were other candidates for the president's job, including former Paramount Pictures Corp. chief executive Barry Diller, who is also on the board of The Washington Post Co. He said that when he was on an operating table preparing for quadruple bypass surgery, he contemplated his own death and told his wife and son to communicate his wishes to Disney's directors: "Call them and tell them Ovitz or Diller." Eisner said Diller rebuffed the idea of coming to Disney.