GEORGETOWN, Del. – A lawyer for shareholders suing Walt Disney Co.'s (DIS) directors Wednesday sparred with Chief Executive Michael Eisner (search) over everything from his work history to his recollection of an important board meeting, kicking off what could be days of heated questioning.
"I don't want to start off here in an argumentative way," Eisner said in the first minutes of cross-examination by Steven Schulman, who had challenged the executive over whether he worked at a low level NBC job during or after college.
But the questions and responses grew only more pointed from there, as Schulman raised questions about a November 1996 Disney board meeting in which directors discussed firing President Michael Ovitz (search) after just 14 months on the job.
Shareholders represented by Schulman, an attorney at Milberg, Weiss, charge that the board shrugged off its duty to investors by allowing Ovitz to leave the company with a no-fault termination and a $140 million severance package.
They claim Ovitz should have been fired for cause, and want the $140 million plus interest returned to the company.
In two days of questioning by his own attorney, Eisner told Delaware's Court of Chancery that he kept the board up to speed on the problems with Ovitz, including discussions at a "gathering" after the Nov. 25, 1996 board meeting.
Schulman wasted little time in challenging Eisner's recollection of that meeting, asking why there were no records or notes related to the discussions.
Several times Schulman seemed to doubt that the meeting even took place, referring to it as the "alleged" or "so-called" gathering.
"It did occur and I was part of it" Eisner said, estimating that it lasted 20 or 30 minutes.
"We gathered to discuss the Michael Ovitz situation with the directors of the company," he said. "What I recall reporting at that meeting is that we would have to pay the full contract to Mr. Ovitz."
Eisner said his comments to the board were based on advice from the company's chief legal counsel, Sanford Litvack, who by all accounts often clashed with Ovitz.
Schulman then asked whether having Litvack advise the company on matters relating to another senior executive whom he disliked could create a conflict of interest.
"I don't think he was conflicted at all," Eisner said. "I think he saw that Mr. Ovitz was not performing well." Besides, Eisner added, Litvack had told him he would seek second opinions from independent lawyers.
So what independent lawyers did Litvack consult, Schulman asked.
Eisner said he did not know, and then conceded that he had never seen any papers from an outside law firm on the matter.