When Walt Disney Co. chief executive Michael D. Eisner and Disney President Michael S. Ovitz appeared on "Larry King Live" on Sept. 30, 1996, their corporate partnership was dissolving into an acrimonious disaster.
But the pair attempted to put a positive gloss on the relationship during the interview. Eisner said that if given the chance he would hire Ovitz again. He dismissed as "baloney" news stories at the time saying the two were becoming increasingly estranged.
"The fact of the matter is, we, together, have as many enemies as Saddam Hussein, so it's very difficult not to have this kind of gossip here," Eisner said on the show.
Under questioning on Thursday in a shareholder lawsuit being heard here over Ovitz's $140 million severance package, Eisner said he was not "completely candid" in the interview, which took place just before Eisner had discussions with Sony Corp. about having it take Ovitz off his hands.
"I was trying to convince Sony that [Ovitz] was the greatest human being that existed," Eisner said when questioned about his comments on the Larry King show.
In retrospect, Eisner testified, the television appearance was a mistake. "I think it was an extremely dumb thing to do," he said. "It was unfortunate and stupid and I wish we hadn't done it, but we did. . . . I was trying to get through a very difficult time."
Steven G. Schulman, lead attorney for the plaintiffs in the case, appeared to be trying to use Eisner's comments on Larry King's show -- a clip of which was shown in the courtroom -- to undermine the credibility of the rest of his testimony regarding the $140 million package Ovitz received when he left Disney in December of 1996 after 14 months on the job.
Plaintiffs say Eisner and other Disney directors failed in their fiduciary duty to investors by not properly deliberating over his hiring and then allowing him to walk away with a no-fault termination. They say Ovitz could have been fired for doing a bad job, which would have made it necessary to pay him much severance.
The shareholders suggest that Eisner did not fully consult with the board over Ovitz's hiring and firing and instead cut backroom deals with his friend of 25 years.
Eisner attempted to rebut that perception on Thursday, rejecting testimony Ovitz gave earlier in the trial. He denied that he and Ovitz had as close a partnership as Ovitz indicated in his testimony.
He also listed numerous responsibilities Ovitz had at the company and denied Ovitz's claim that his authority at Disney was undercut from the start. "I don't think he was set up for failure," Eisner said.
Schulman meanwhile sought in his questioning to portray Eisner as an imperial chief executive who dominated a compliant board. As an example, Schulman referred to minutes from a Sept. 30, 1996, board meeting in which directors "unanimously approved" the terms of a new contract for Eisner.
The contract included a provision under which if Eisner died or became disabled, his wife, Jane, would be nominated for a board seat. Schulman asked if any consideration was given to Jane Eisner's qualifications to serve on the board.
"Other than that she's smarter than me?" Eisner replied. "No, she has not been the CEO of any company."
Schulman pressed Eisner on other corporate governance practices at Disney, including allowing major shareholders and former directors to come to board meetings. Schulman asked if Eisner had received any opinion on the "propriety" of such a practice.
"I thought it was good for the company and proceeded," Eisner said. "I thought that the propriety was fine."
At another point, Schulman asked Eisner about multiple one-on-one discussions he had with directors during a celebration of Walt Disney World's 25th anniversary in September 1996, at the same time as the Larry King interview. Eisner has testified that during the conversations he discussed the growing Ovitz crisis, which he likened to a "September hurricane, an emotional hurricane."
Schulman appeared to be using the informal conversations as an example of sloppy governance practices at Disney and Eisner's control of information flowing to directors. Eisner said it was "essential" that he have the conversations.
Eisner's voice grew increasingly hoarse during his testimony on Thursday, his fourth day on the stand, as Schulman questioned in fine detail all the events of Ovitz's tenure at Disney. At one point, Schulman asked for the precise time a plane carrying Sid R. Bass, at the time a major Disney shareholder, arrived for a meeting with Ovitz and Eisner in Aspen, Colo., just prior to the announcement of Ovitz's hiring.
"Are you serious with these questions?" Eisner asked. Schulman pressed on. "You are serious," Eisner acknowledged. The cross-examination will continue Friday.