Eisner versus Ovitz. The Showdown in Tinseltown.

Corporate Conflicts of Interest at Walt Disney Inc. (DIS): Walt Disney is currently under scrutiny for paying former senior executive Michael Ovitz a severance package valued at US$140 Million. Court testimonials from witnesses in the hearing have indicated that the package may have been excessive compensation. There are also allegations that Michael Eisner, the current CEO of Disney, authorized the terms of the package without the knowledge of Disney's Board of Directors.

The Human Resources Department should always have fully documented employment compensation and termination of services guidelines. In the case of compensation for senior management, the complete terms and amounts should be reviewed and approved by the Board of Directors. If the policy is fully documented, and those procedures followed, it should reduce the chances of any improprieties and shareholder lawsuits.

In my experience, I have come across numerous firms where compensation was always subjective and policies were not always applied consistently. Since employee wages and bonuses are a significant financial component of a firm's income statement and bottom line, compensation is often mismanaged or incorrectly budgeted line item.

Job description, clear lines of reporting, compensation structure including salary grades and maximum levels of compensation. Severance policies can change over time and change often. However, as long as a firm applies that policy consistently (i.e., formula based compensation) for all employees at the time said policy was in effect there should never be any controversy of any individual receiving different severance packages.

 
© 2004 Nelson Chin.
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