A Case of Conflict at Disney

Through the leadership of Michael Eisner, Frank Wells, Jeffery Katzenberg, and Roy Disney, the Walt Disney Company became a power house and a Wall Street favorite, but as you will see, conflict at Disney caused much turmoil for the company and its executives.

In 1995, Eisner – Disney’s CEO announced that he was hiring his long time friend and one of the world’s most successful celebrity agents, Michael Ovitz, to become the company’s new president. The two were so close that their families often spent the holidays together. In fact, during one of their holidays together, Eisner gave Ovitz a note that concluded with. We are going to be a great team. Every day I am thankful we are together. But a scant 14 months later, Eisner fired Ovitz, wanting him out of Disney so bad that Eisner paid him $140 million to leave. As a result Disney shareholders sued, alleging that Eisner had breached his fiduciary duty. In October 2004, the lawsuit went to trial, forcing Eisner and Ovitz to reveal details about their partnership.

The seeds of the conflict between the two men were sown from the beginning. Ovitz accepted the position as Disney president without knowing his formal areas authority. At one point, he told Eisner I’m myself in your hands. Even in the midst of hiring Ovitz, Eisner routinely backed those who he knew were hostile to Ovitz’s hiring. In fact, the day before Ovitz’s hiring was announced two of Disney’s senior executives told Ovitz that they would not work for him because of his relative lack of experience. One said, Welcome to the company. I just want you to know that I’ll never work for you. Eisner sat silent Privately, Ovitz asked Eisner to back him. I can’t do that, Eisner responded.

Eisner and Ovitz also had conflicting styles. Ovitz liked glitz and glamour. Shortly after starting work at Disney, Ovitz hosted a party where Tom Hanks, Steven Spielberg, and other celebrities were guests. The party cost Disney $90,000 which Ovitz considered bargain. Eisner considered it lavish. Ovitz also had a habit of canceling meetings at the last minute, which was common for Hollywood agents but offended many at Disney. At the trial Eisner admitted to wanting to fire Ovitz only 5 weeks after he hired him. According to one of Eisner’s associates, the only reason he didn’t was the belief that Ovitz would commit suicide. But, a few months later, Eisner was actively trying to remove Ovitz. He wrote to two Disney board members, I hate saying this but his strength of personality together with his erratic behavior and pathological problems (and I hate saying that) is a mixture leading to disaster for this company. The following week, Eisner sent a Disney executive to fire Ovitz only to write, I am committed to making this a win-win situation to keep our friendship intact to be positive. You still are the only one who came to my hospital bed (when Eisner had emergency heart surgery) and I do remember.

The career of a person once described as Hollywood’s most powerful was in ashes. At one point, David Geffen, a successful record executive and producer, said to Ovitz. This isn’t the old you. You could close anything. You could get it done. Now you have no credibility. Meanwhile Eisner never really recovered from the Ovitz incident. In 2005, 45 percent of Disney shareholders gave Eisner a ‘no confidence’ vote. Although Disney won the suit filed over Ovitz’s $140 million severance package in the late 2005, Eisner stepped down as Chairman, and resigned from the board of directors, severing all ties with the company he had led for more two decades. As one observer put it at the conclusion of the trial in 2005, it was a no-win, no-win. What started out as friendship ended in a firing and a lawsuit with both men’s careers irreparably damaged. The situation at Disney shows us how conflict can destroy careers and harm companies.