If Eisner Quits, He Would Still Reap Gains

If Michael Eisner left Walt Disney Co. today, he could immediately cash in stock options for about $67 million and could expect Disney to pay him up to $30 million over the next five years.

The $30 million would accumulate through a $6-million “annual bonus” each year through 2008, payable if Eisner quit because his duties were reduced, or if the board fired him for anything other than gross negligence or malfeasance, according to his employment contract.

The details were spelled out in the company’s January proxy statement to shareholders, which summarized provisions of a contract agreed to in January 1997 and amended in June 2000.

If Eisner took a job with another major entertainment firm other than as an independent producer within a year of his departure, Disney wouldn’t have to make the last $6-million payment, reducing Eisner’s bonus total to $24 million.

Most of Eisner’s severance benefit would be in the form of stock options, however, as was the case with former Disney President Michael Ovitz, whose departure package was valued at more than $100 million when he left the company in 1996 after 14 months on the job.

Eisner already has 12 million vested Disney options allowing him to buy its stock at $21.10 a share, according to the company’s proxy statement. With his departure, an additional 3 million options would vest, or become exercisable, at $26.38; 3 million more at $31.66; and another 3 million at $42.21.

At Wednesday’s closing stock price of $26.65, Eisner could immediately realize more than $67 million on the options.

If the stock rose to $30, he could exercise them for a profit of more than $117 million, which would rise to more than $202 million if he sold with the stock at $35.

If Eisner did nothing with his stock options until Disney shares reached $45, then cashed them all in, he would realize a profit of more than $391 million before taxes and any costs involved in buying and selling the shares.