Daniel Loeb Headshot - P 2013
Getty ImagesPresumably having grown tired of belittling the management at Sony, activist investor Daniel Loeb has turned his gaze toward Sotheby’s, the iconic auction house he has been buying into for more than a month.
On Wednesday, Loeb released a public letter revealing that his Third Point hedge fund owns 9.3 percent of Sotheby’s and is its largest shareholder. His letter also calls for the resignation of Sotheby’s CEO William Ruprecht and accuses management of wasting company money on expensive meals and allowing competitor Christie’s to overtake them in the contemporary and modern art category.
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Loeb also blasted the CEO and the rest of the board for not aligning their own interests with the interests of their shareholders, which he illustrates by pointing out that Third Point owns almost 10 times as many fully vested shares of Sotheby’s than do all of the company’s directors and executive officers combined.
“In the course of our investigation into the company’s business practices, we came across numerous anecdotes of waste,” Loeb wrote. “Typical of the egregious examples was a story we heard of a recent offsite meeting consisting of an extravagant lunch and dinner at a famous ‘farm-to-table’ New York-area restaurant where Sotheby’s senior management feasted on organic delicacies and imbibed vintage wines at a cost to shareholders of multiple hundreds of thousands of dollars. We acknowledge that Sotheby’s is a luxury brand, but there appears to be some confusion — this does not entitle senior management to live a life of luxury at the expense of shareholders.”
Loeb compares Sotheby’s to “an old master painting in desperate need of restoration,” part of which is a new CEO and an updated corporate culture, apparently.
“A review of the company’s proxy statement reveals a perquisite package that invokes the long-gone era of imperial CEOs: a car allowance, coverage of tax planning costs and reimbursement for membership fees and dues to elite country clubs,” writes Loeb. “What example does this set for Sotheby’s hard-working employees, who see leaders at the top collecting guaranteed perks rather than rewards delivered for growing earnings?”
Sotheby’s has responded to Loeb’s attacks by pointing out its surging stock price. The stock is up 49 percent so far this year.
Toward the end of the letter, Loeb volunteers his services by writing: “I am willing to join the board immediately and help recruit several new directors who have experience increasing shareholder value, share a passion for art, understand technology and luxury brands, or have operated top-performing sales organizations. Importantly, our candidates would also better represent Sotheby’s expanding geographic footprint.”
