Expert Assesses Ovitz Options

An economist testified Wednesday that an expert witness in a closely watched shareholder lawsuit overvalued stock options granted to former Walt Disney Co. President Michael Ovitz.

Frederick C. Dunbar, a senior vice president at National Economic Research Associates and an expert witness for the defense, said he valued about 5 million options granted to Ovitz at about $60 million, although an expert witness for Disney shareholders valued the stock options at about $90 million.

Dunbar, who holds a doctorate in economics from Tufts University, also said he determined that institutional investors took into account what Ovitz potentially might be paid when his hiring was announced.

He said the market consensus at the time was that the benefits of hiring Ovitz exceeded the cost of his compensation package.

Dunbar said Disney’s stock gained about $1.1 billion in value on the day Ovitz’s hiring was announced in August 1995 but didn’t show any dramatic change on other days when the details of Ovitz’s employment agreement were made public.

“The market showed enthusiasm through the price effect. The market showed enthusiasm in the post-news commentary,” Dunbar said.

In the lawsuit filed in the Delaware Court of Chancery in Georgetown, shareholders claim that Disney’s board failed in its fiscal responsibilities by not properly scrutinizing Ovitz’s employment contract in 1995 and by granting him a no-fault termination that entitled him to a $140-million severance package when he left a year later.