When You Wish Upon A Star, You Get Big Bucks Michael Eisner Cashes In Disney Stock Options, Whistling While He Works To The Happy Tune Of $514 Million
In one of the largest stock option transactions by a corporate executive, Walt Disney Co. Chairman Michael Eisner sold 5.4 million shares of Disney stock Wednesday.
Eisner sold the shares, which had a market value of $514 million based on Wednesday’s closing price of $95.19 per share, to Goldman, Sachs and Co., which will resell them to other investors.
It was not clear exactly how much Eisner made from the transaction, but Graef S. “Bud” Crystal, an executive compensation expert who helped draft Eisner’s contract, said it was unlikely that Eisner was paid the full market value for the giant block of stock.
The Los Angeles Times, citing unidentified sources, reported today that Eisner probably sold shares for nearly $93 a share. That would mean proceeds of about $500 million for Eisner.
The deal put Eisner in the range of $1 billion in earnings since he was named Disney’s chairman and chief executive officer in 1984, slightly behind the late Coca-Cola Co. Chairman Roberto C. Goizueta in earnings for a chief executive, Crystal said. He estimated Goizueta’s earnings from Coca-Cola at $1.3 billion.
In a statement, Eisner said he realized his stock transaction would attract attention.
“The exercise of the stock options granted to me in 1989, which are due to expire in about a year, will undoubtedly provoke much discussion,” Eisner said.
“The profits reflect the remarkable growth of our company which our shareholders and I have been fortunate to enjoy over the past 13 and a half years, which I hope and expect to continue,” he said.
Eisner used his options, which were due to expire in about a year, to buy a total of 7.3 million shares at 1989 prices or slightly above. He immediately sold 5.4 million shares, and will keep 1.6 million to add to his own holdings of Disney stock.
He will also give away 300,000 to the Eisner Foundation, a charity to which Eisner donated 1 million Disney shares last month.
Disney said that proceeds from the shares he sold will go toward estate planning as well as taxes and paying for the costs of the transaction.
The options allowed Eisner to buy Disney stock at $17.14 per share for 5.5 million shares, and $19.64 per share for another 1.8 million, said Disney spokesman John Dreyer.
The stock options were part of a contract signed after Disney stock soared under Eisner’s reign during the mid- and late 1980s. That contract, and Eisner’s current deal with Disney, hinges heavily on the company’s performance. His base salary is $750,000, a low figure for executives of such large companies.
Under Eisner’s current contract, he has options on an additional 8 million shares, but the option price on 3 million is above the market price at the time of signing. In other words, Disney’s stock must increase in value in order for Eisner to make money on those shares. The remaining 5 million are worthless if the stock decreases in value.
Nevertheless, the deal ranks among the biggest for executives. Henry Silverman, chairman of HFS Inc., owner of the Avis car rental service, had options valued at $540 million at the end of 1996, but did not exercise them, Crystal said.