GEORGETOWN, Del. - Michael Eisner, Walt Disney Co.'s chief executive, described the company's former president, Michael Ovitz, as a "psychopath" with a "character problem" in company memos revealed Thursday in a shareholder lawsuit.
The lawsuit, which has been in progress for more than seven years, claims Disney's board did not properly scrutinize Ovitz's employment contract when he joined the company in 1995 and then wrongly granted him a nonfault termination that entitled him to a $140-million severance package 14 months later.
"If I should be hit with a truck, the company cannot leave him as CEO or figurehead CEO," Eisner said in a memo. "It would be catastrophic."
John Donohue, a Yale University law professor and witness for a group of Disney shareholders, testified about the memos during the trial's second day.
Donohue also said that under his review of California law, Ovitz's contract and depositions in the case revealed that the board had the right to fire Ovitz for cause.
In particular, Donohue cited "habitual lying" by Ovitz during his time as Disney's second-in-command.
Under the terms of Ovitz's contract, he could be fired for cause in case of gross negligence or malfeasance, Donohue said.
Neither term was fully defined in the contract, but applicable laws didn't require the company to prove that acts of criminal conduct, scandalous behavior or fraud had occurred for an executive to be fired for malfeasance, Donohue said.
