Michael Ovitz and Michael Eisner

For Worse
Michael Ovitz and Michael Eisner

“Best friends” was how Michael Eisner and Michael Ovitz described each other for much of the 25 years leading up to their 1995-96 partnership at Disney. “Fifteen disastrous months was how FastCompany described that same short partnership.

By the end of it, Disney was on the hook for $130 million in severance payouts to Ovitz, spurring a nasty decade of shareholder lawsuits and abominable public relations. In one court document, Eisner called his old friend, the man he’d hired to succeed him at Disney, “a psychopath” who “cannot tell the truth.”

 

 

What went wrong, and why so swiftly?

Before Michael Ovitz took the role of Disney president, he was deemed king of the dealmakers, the most powerful man in Hollywood. A talent agent, Ovitz had revolutionized the industry by packaging multi-film deals for his clients. Eisner, for his part, had been at Disney’s helm for a dozen years of unprecedented diversified growth, not just in films but in theme parks, television networks, and new media. The very week before he appointed Ovitz, he acquired ABC for $20 billion, the second biggest deal in corporate history. The Disney chief was under increasing pressure from the board to create a succession plan. His second-in-command, Frank Wells, had recently died in a helicopter accident, and Eisner himself had just undergone emergency bypass surgery. Ovitz had nearly taken the top post at Universal, and Eisner couldn’t stand the thought of his old friend as a competitor. According to James B. Stewart in Disney War (Simon & Schuster, 2005), Eisner asked his friend, “Why would you want to go to Universal when you could come to Disney as my partner?”

From the moment of Ovitz’s arrival at Disney, the match looked like a poor fit. On the night before Ovitz was appointed president, Eisner invited him to his house to meet with two top Disney executives—then stood by silently when the executives openly refused to report to Ovitz. When one of them, general counsel Sandy Litvak, subsequently moved into the office held by the former president, Ovitz said, “Why doesn’t Sandy move?” But Eisner dismissed the idea, telling his old friend that a new office would be renovated for him shortly. Ovitz was relegated to the fifth floor, where division heads and lesser executives lived—a sign of diminished status. For all Ovitz’s power in Hollywood, it wasn’t the kind of power that ran corporations. His power was built on direct person-to-person contact. At holiday time when Ovitz wished an influential board member a happy New Year, Eisner reacted bitterly. “I really must know what you’re up to,” Eisner told him. “These small but aggravating problems pale in comparison to how well you are operating, but it’s just little things like respecting my relationship to my bosses… You are squeezing the toothpaste from the middle. It’s one way to get paste, but it’s not my way.”

On the night that Disney’s board approved his contract, Ovitz threw the kind of extravagant party he’d built his career on. The guests included Tom Hanks and Stephen Spielberg, as well as contemporary artist Chuck Close and members of Disney’s Imagineering and theme park divisions. When the bill for the party came in at $90,000 Eisner asked Sandy Litvack to monitor Ovitz’s expenses.

In a conversation with another executive, Eisner characterized Ovitz’s attitude about money thus: “What’s a million here or there? That’s the way all agents think. Michael said that to me a thousand times while he was an agent. Even what does a few billion dollars mean to Disney. I had to therefore hold the financial reins.”

Still, Ovitz threw himself into his new role with uncommon energy, spending 12-hour days and seven-day weeks at the office. He pitched Eisner on deal after deal. As fast as Ovitz pitched them, Eisner rejected them—or ignored them altogether. “The deal is not the essence of Disney,” Eisner wrote to the renowned dealmaker six weeks into his tenure. “Operations are the thing. The deal is a means to an end . . . but the deal cannot take the lead. . . . I guess what this letter states is all so obvious, but it did take me many years to be able to even state the obvious. What better time to put the thought in writing as we begin this new chapter in our lives.”

If there was a better time to put the thought in writing, or even in the air between them, it had already passed. The ensuing months were an increasingly bitter slide of disappointments on both sides until Eisner compelled Ovitz to sever their contract in December 1996. James Stewart describes the scene: “At the end of the discussion, Eisner said he still wanted to be friends, that he hoped this ‘wouldn’t affect their personal relationship.’ Eisner said that he and [his wife] Jane were still looking forward to hosting a fiftieth birthday party for Ovitz in Los Angeles just two days later.

“Ovitz stared at him, incredulous.”

Humiliated by the experience, Michael Ovitz never again set foot in the Disney building.

A decade later, when the last of the shareholder suits against Disney for its massive payout to Ovitz were finally decided in June 2006, Chancellor William B. Chandler ruled that Eisner had not violated the letter of law in issuing the severance, and found in his favor. But Eisner’s behavior vis a vis Ovitz?

Chandler said it fell “far short of what shareholders expect and demand from those entrusted with a fiduciary position.”

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