Ovitz’s Tenure at Disney Likened to ‘a Cancer’

A former Walt Disney Co. director told a judge that former President Michael Ovitz’s tenure at the company was “like a cancer” and that Chief Executive Michael Eisner was justified in firing him.

Thomas Murphy, who served on the Disney board from April 1996 through November 2003, testified Thursday that he absolutely agreed with Eisner’s decision to fire Ovitz after only 15 months on the job and thought it was “the right thing to do.”

“He was just not working out,” said Murphy, testifying in the Georgetown, Del., trial of a shareholder lawsuit. “It was like a cancer in the organization to have someone in that high a position and it just not working out.”

Eisner hired Ovitz, a former talent agent who represented stars including Tom Cruise and Kevin Costner, in 1995 and fired him a little more than a year later. Disney investors claim former and current Disney directors should be held financially responsible for Ovitz’s severance package, which they value at more than $140 million, because the directors failed to oversee his hiring and firing properly.

Under questioning Thursday in Delaware Chancery Court, Murphy said he didn’t remember the board voting on Ovitz’s firing or approving his termination payments. He agreed that the payments were necessary, noting that Eisner was known to be “tight with the dollar” and wouldn’t give any money “unless he thought he had to.”

“The fact is we had a contract with this man,” said Murphy, 79. “He was a big, important man from Hollywood.”

Murphy is a retired chairman and former chief executive of Capital Cities/ABC Inc., which Disney bought in February 1996 for $19.5 billion.

Another former director, Ignacio Lozano, also testified Thursday that the firing was in the best interest of Disney shareholders and employees.

“It was really a problem that had no solution,” said Lozano, a U.S. ambassador to El Salvador during the Ford administration who left the Disney board in 2001.

Lozano, former editor of La Opinion newspaper, said that when he first heard from Eisner that Ovitz was being considered as Disney’s president, “it was a bombshell.” He said he thought, “Wow! Let’s sign him up before he changes his mind.”

Shareholder lawyers contend that the company may have had cause to fire Ovitz without paying him the severance. Disney disputes that, saying it was obligated to pay him.

Disney has directors’ and officers’ insurance provided by American International Group Inc. and other companies that might cover a ruling that Eisner and other executives must return Ovitz’s severance payments to the company.