$130m handshake that won't shock anyone

  • @dusborne
If the British public does not much like it when executives of well-known companies are discovered to have been given seemingly excessive salaries or golden handshakes, it should pause and look at America. Here we are talking not millions but tens of millions. And the moral outrage barely registers.

Best of all, look at the current, extraordinary case of Michael Ovitz, the once-mighty wheeler-dealer of Hollywood who recently jumped ship as chairman of the Walt Disney company after a 14-month tenure that is generally considered to have been undistinguished if not disastrous.

The exact size of his pay-off will be set out in a filing to the Securities and Exchange Commission by Disney tomorrow. It is known, however, that the total value, part of it cash and part in options tied to the company's performance, will be between $76m (pounds 49m) and $130m.

Multi-million goodbye presents are not unusual in the United States, especially in the entertainment industry. Sony and Time Warner are companies that have also recently written sky-high cheques for departing executives.

The Ovitz deal sets a new standard, however, by virtue of its extravagance and because of the general recognition that it is reward for a job poorly done.

Disney and its chairman, Michael Eisner, an old Ovitz pal, have not escaped opprobrium entirely. The company is facing a multi-million dollar law suit claiming Mr Eisner is violating his responsibilities to shareholders by effectively giving so much company wealth to Mr Ovitz.

There has also been a degree of indignant sniping in studio corridors (not least inside Disney) and on some comment pages. ("Beavis and Butt- head do the Disney shareholders" ran the headline on a deeply critical column in the normally corporate-friendly Wall Street Journal this week).

Whether or not this is a case of corporate compensation gone mad, it has so far made barely a ripple on the wider political scene.

Cedric Brown of British Gas was sandbagged in the British media last year when he received a retirement package worth a mere pounds 3.4m. He may have wished he was in the US.

Indeed, Disney is claiming to be serene about the affair. A spokesman yesterday termed the lawsuit a "trivial" one filed by a lawyers' office that specialises in taking on corporate giants. Since Mr Ovitz left Disney on 27 December and the pay-off has been sealed, any effort to block it may be too late.

Disney also points out the terms of a premature departure by Mr Ovitz were more or less preordained by provisions included in the contract that originally induced him to abandon his own Creative Artists talent agency for Disney in 1995. "The contract was out there in the public domain and the press praised us for it," Disney's John Dreyer said. "I think there is some revisionist thinking now".

Entertainment executives also make another important point: it is more than probable that down the road Disney will find itself on the other side of a table from Mr Ovitz on some deal or another; better he be a friend than foe.

Other factors that may make the Ovitz pay-off less egregious than it may seem are perhaps cultural. "First, you have to understand that in this business, the senior executives are treated like stars, just as if they were Stallone or Michael Jackson," a music-industry executive said. "And don't forget: in America, money is not a dirty word".