In 1997, after a year of employment, Disney fired Mike Ovitz and gave him the inflation-adjusted equivalent of $250 million.

The announcement that the Disneyland Board of Directors had quickly dismissed CEO Bob Chapek startled the entertainment industry early Sunday. The Board revealed that it had been successful in persuading former CEO Bob Iger to take the throne of the Magic Kingdom in the same statement, further startling the world. On hearing the news, Disney stock, which has lost 40% of its value so far this year, increased by 6%.

Earlier this year February 2020, Bob Chapek was appointed CEO of Disney. That translates to a tenure of two years and nine months. 1,023 days approximately. Chapek will receive a payout of almost $20 million in return for his efforts.

And although receiving $20 million after just being sacked from a position you held for two or three years may be good, surely Bob Chapek is uninformed of the situation surrounding Michael Ovitz's position at Disney throughout the 1990s.

Mike Ovitz spent a little around a year with Disney in the mid-1990s. Disney gave Ovitz a little over after accounting for inflation.

$500 million

to go. one year later. precisely one year now and 3 months...

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Creative Arts Organization

While still a college student, Michael Ovitz worked as a part-time tourist guide for Universal Studios in his very first job in the movie business. Ovitz joined William Morris Agency and worked in the mailroom after receiving his degree in theater, film, and television from UCLA in 1968. He gradually ascended the ranks at William Morris, becoming a prosperous TV agency.

Ovitz soon became dissatisfied with his compensation, though, and the dearth of career chances. William Morris and his four coworkers made the decision to start their own agency after months of planning. The crew was sacked in January 1975 after William Morris learned of the plot before it could be implemented. The following year, the partners established the Creative Artists Agency (CAA), which they named after the incident.

Within CAA's first week of operation, Ovitz allegedly secured three movie package deals. With $90.2 million in annual bookings by the end of its fourth year in business, CAA was the third-largest Movie agency. Ovitz, who eventually served as chairman of the board, was instrumental in the agency's success. He worked at a talent agency for a number of well-known actors and directors, including Steven Spielberg, Barbra Streisand, Kevin Costner, Dustin Hoffman, and Tom Cruise.

Ovitz has assisted in the negotiations of significant mergers and agreements, including the purchase of Columbia Pictures by Sony and the signing of Coca-Cola as a customer by his own business. He played a big role in David Letterman's move from NBC to CBS. He also helped with network moves.

Call from Disney

In conclusion, Mike Ovitz was possibly the most powerful individual in the entire entertainment world in the 1980s and 1990s, and CAA was by far the most important firm in Hollywood. He was admired, feared, envied, and revered in equal measure. He developed a lot of rivals both within and outside of his own agency. He also discovered that he was in charge of a machine that needed to be closely monitored 24/7/365. Clients had urgent needs. The studios were cheap and avaricious. Young partners at CAA who desired their own opportunity believed Ovitz was obstructing it.

Ovitz was prepared to move on by 1995. He desired to quit the agency business and join a large corporation where he could fly around on a jet and earn enormous sums of money from stock options. Instead of trying to persuade someone else to access their pocketbook for a customer, he desired a job in which he had financial control.

Ovitz's old friend and Disney chairman Michael Eisner arrived at the door with what must have seemed like the ideal offer at the ideal time. Ovitz was to serve as Eisner's apparent heir at Disney, and Eisner made it obvious. Eisner hinted that Ovitz would take over as CEO after a year or two of knowing the business's ins and outs.

In October 1995, Michael Ovitz was named the new Executive President of Disney.

Disney and Ovitz negotiated a salary before Ovitz accepted the job, and because of what transpired after that, the agreement became the focus of a protracted legal dispute.

Ovitz departed CAA with promised future earnings worth $200 million in his pocket. Disney and Eisner promised to make him whole and if for any reason the job did not pan out, they would give him a golden parachute without any conditions. That's all there is to it.

Ovitz quickly discovered, however, that as Disney's second-in-command, he was unable to achieve the same levels of success that he had at CAA. He discovered that his job responsibilities weren't clearly defined and that he didn't have as much authority as he had in his former position. He was meant to be Eisner's right-hand guy, but in reality, that wasn't the case. However, there were constant conflicts between the two executives, and worst of all, Ovitz rapidly learned that Eisner had no plans to step down from his position as CEO anytime soon and that he was not, in fact, the heir apparent. A full ten years after Ovitz was persuaded to join, Eisner would remain CEO until September 2005. ...Bob Iger, a gifted young executive who took over for Eisner as CEO.

In January 1997, following several months of war of words, Michael Dell fired Mike Ovitz. Ovitz spent a total of one year and three months with Disney.

A gifted young executive named Bob Iger succeeded Ovitz as executive president.

Large-scale Exit Package

Disney compensated Ovitz $138 million after terminating his contract. Disney shares worth $100 million and $38 million in cash made up the deal. That amounted to about $300,000 per day of work. Actually, if you simply count the workdays from Monday through Friday, Ovitz effectively made $445,000 each and every day that he was employed by Disney. Also, keep in mind that this occurred in 1996. The equivalent amount of money today as it was in 1996 would be about $850,000 every day.

Ovitz received an annual salary that, after accounting for inflation, is equal to $256 million in today's dollars.

Disney stockholders were furious after learning about his gift, which is somewhat understandable. Several stockholders filed a lawsuit against Eisner and Disney's board of directors because they believed Eisner received an excessive severance payout. However, the following is important:

There was no retirement payment made. Disney utilized this enormous salary as an incentive to hire Ovitz. It was given to him as payment for leaving CAA and foregoing a sizable future commission.

A Delaware court finally used this distinction in its decision to absolve Eisner and the Disney Board of all wrongdoing. The following jab at Eisner was contained in the court's 175-page judgment, which was not released until 2005.

I still come to the conclusion, after carefully reviewing and assessing all the facts, that Eisner's actions were conducted in good faith, despite all the reasonable charges that may be leveled at him, notably for having installed himself as the omnipotent and infallible ruler of his own Magic Kingdom.

Eisner worked at Disney for a year, but did the company wish it could have hired him for more? Obviously. But it made no difference. The check was deposited, and the contract was clear.

Just so you know, with dividend reinvestment, Michael would have been able to recoup over $1 billion from those $100 million shares by the end of 2021 if he had hung on to them.