IN THE WASHINGTON POST, COLUMNIST ROBERT J. SAMUELSON HAS SUGGESTED that Michael Eisner, the CEO of the Walt Disney Co., pay Michael Ovitz's severance package out of his own pocket. The $90 million Ovitz is due to receive for flopping as an executive, Samuelson says, has become a "public relations calamity" that Eisner could end by simply picking up the check.
I agree with Samuelson that it would be bracing if Eisner took responsibility for his own blunder in hiring such a turkey for president of the company in the first place. But I don't see it happening. I hope that doesn't sound cynical. It's just that I know Eisner has had previous opportunities to end public relations calamities by paying up with his own money, and, so far, no go.
In 1988, for instance, there was the bitter strike of Hollywood screenwriters, partly over the studios' insistence that the writers accept a rollback of the rerun payments called residuals. Studio executives were saying writers had to make some sacrifices in the leaner economic conditions the industry was facing. Then, in an article in the New Yorker, Joan Didion pointed out that the total received in residuals by all 9,000 members of the Writers Guild was $58 million and that Eisner's 1987 compensation was an estimated $63 million.
To me, the juxtaposition of those two numbers was compelling: if you subtracted $58 million from Eisner's compensation to pay the residuals, the screenwriters would be happy, Eisner would still have $5 million a year to live on, and everyone could go back to work. How was Eisner going to live on $5 million a year? I figured he could cut back on a few nonessentials. Didn't happen.
Six years later, when Disney was involved in a controversial effort to build a history theme park near the Civil War battlefields of northern Virginia, the company wanted the state to pitch in $132 million for the necessary road improvements—a demand that was contributing to what was steadily becoming a genuine public relations calamity. By that time, Eisner was making $202 million a year, so I suggested publicly that he pay for the roads himself. That would still leave him an annual take of $70 million. We knew he could live on that, because he'd got by on $7 million less in 1987. Didn't happen.
I didn't really think it would. Many years before, when CEOS were beginning to make serious money from incentive bonuses tied to profits or stock prices, I'd suggested that in bad years the CEO should pay the corporation on the same sliding scale. I called it a disincentive negabonus. Didn't happen.
It's also unlikely Ovitz will take the suggestion made by James Classman, in another Post column, that he divert his severance to charity. If he did, he would be breaking the first rule of major executives: get paid no matter what.
If the price of the stock goes up, a CEO always speaks of his $100 million annual compensation as a bargain considering what he made for the shareholders. In a disastrous year, there were, as the annual reports say, a number of factors. If top executives mess up so badly that they have to be canned, they get paid for that too. (F. Ross Johnson, who botched the leveraged buyout of RJR-Nabisco badly enough to lose the entire company, was handed $53 million on his way out the door.) Top executives of major corporations are the only Americans who do business in a totally risk-free environment.
In theory, I suppose, the Disney board could just subtract $90 million from Eisner's paycheck, with the notation "turkey hiring." Never happen. That would he a negabonus.
© Time, January 13, 1997 Calvin Trillin