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Chairman Doubted Ovitz’s Salary

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From Times Staff and Wire Reports

Walt Disney Co. Chairman George J. Mitchell testified Tuesday that it was best that Michael Ovitz leave as company president in 1996 rather than prolong the growing tensions with other company executives.

The former U.S. Senate majority leader also testified that directors substantially discussed Ovitz’s pay package.

Mitchell’s testimony in Delaware Chancery Court came in a shareholder lawsuit in which Disney directors are being sued for allegedly rubber stamping Chief Executive Michael Eisner’s decision to hire Ovitz in 1995 and his decision to fire him a little more than a year later. Plaintiffs’ lawyers allege that Disney unnecessarily paid Ovitz a stock-and-cash severance package valued at more than $140 million.

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Mitchell said he questioned two directors, Irwin Russell and Raymond Watson, on the board compensation committee about the reason Ovitz was receiving such a large, options-laden pay package when he joined Disney in 1995.

“I thought it was large, and I asked why are we talking about 3 million options,” Mitchell said.

Mitchell said he was told Ovitz earned up to $25 million annually as head of Creative Artists Agency, and that the large number of options were to offset “a huge reduction in pay” he was taking in joining Disney.

Mitchell testified that when Ovitz was fired in 1996, Disney’s former top lawyer, Sanford Litvack, told directors that the company had no legal grounds to withhold Ovitz’s severance.

Mitchell also testified that he was recruited by Eisner to join Disney as president before Ovitz was hired. Last week, Eisner testified that he also once considered hiring Secretary of State Colin L. Powell as president.

Court recessed until Monday, when former director and theme park chief Richard A. Nunis is expected to testify.

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