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
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.
inquire about consulting or speaking engagements, e-mail: Nelson