Ovitz’s Salary Called Excessive

Former Walt Disney Co. President Michael Ovitz’s pay was unreasonable and out of line with that of other No. 2 executives at similar companies, an executive pay consultant testified Monday.

USC professor Kevin J. Murphy called Ovitz’s deal one of the most generous ever awarded a non-chief executive when Ovitz was hired in 1995 as second-in-command to CEO Michael Eisner, including the most valuable stock option grant ever given a U.S. executive. Ovitz was forced out 15 months later in a “no-fault” termination that allowed him to collect a hefty severance package.

Murphy compared the $8.5-million salary and bonus for Ovitz with a median salary and bonus then of $540,000 for other presidents.

Murphy was called by lawyers representing shareholders in a Delaware Chancery Court lawsuit alleging that Disney directors failed to properly oversee Ovitz’s hiring and firing. They are seeking to recoup for the company $200 million in payments and interest.

An Ovitz spokesman called Murphy’s comparisons to other executives “meaningless and misleading,” adding that he failed to take into account Ovitz’s prior position and pay levels in the entertainment industry.

Under cross examination, Murphy acknowledged that in evaluating Ovitz’s pay he did not take into account that the former top Hollywood agent had left a job paying $20 million to $25 million annually as chairman of Creative Artists Agency.

Murphy also conceded that he did not take into account that Seagram Co. had actively courted Ovitz to head the parent of Universal Studios, nor did he compare Ovitz’s pay with Eisner’s.

Plaintiffs have argued that Disney wasted more than $140 million in cash and stock options on Ovitz. Ultimately, records show, Ovitz reaped $109.3 million -- $38.9 million in cash and $70.4 million from his stock options -- with a large chunk of his options expiring.

Ovitz is expected to testify as early as today. His private jet was parked Monday at the Sussex County Airport.