Sotheby’s Handlers to Confront Board, Pay Plan Backed

William F. Ruprecht
Sotheby's Chief Executive Officer William F. Ruprecht. Source: Sotheby's via Bloomberg

Sotheby’s annual shareholder meeting tomorrow morning in New York may stir a scream or two.

Locked-out art handlers who own shares in the publicly traded auctioneer will confront directors about labor practices, according to the union representing the workers.

“Management’s decision to lock out the workers during negotiations was an effort to starve them into submission,” said Carin Zelenko, director of capital strategies for the International Brotherhood of Teamsters. The handlers have been out for nine months.

Sotheby’s has said in filings that the lockout of 43 workers followed union statements to the media threatening a strike.

Art handlers may also speak out against the company’s policy of automatic executive payouts should the company ever be acquired. The Teamsters filed a shareholder proposal against Sotheby’s “change-in-control” payouts.

The Teamsters’ proposal called the auctioneer’s policy of immediately vesting some stock-payment plans a “golden parachute” that disregards executive performance. Had there been a change of control at the end of 2010, Chief Executive Officer William Ruprecht -- whose compensation last year was valued at $7 million -- would have been eligible for $18 million in severance and benefits, the Teamsters said.

Competing for Talent

In a filing, Sotheby’s board said prohibiting change-of-control vesting “may put the company in a competitive disadvantage in the competition for talent.”

Proxy advisers Institutional Shareholder Services and Glass Lewis & Co. issued reports supporting the Teamster proposal. They also recommended voting for Sotheby’s executive-compensation plans.

Last month, Citigroup Inc. shareholders rejected the bank’s executive-compensation plan after ISS issued a report opposing it.

The two proxy advisers declined to support a union-sponsored pension-fund campaign against the three members of the board’s nominating and corporate governance Committee who are up for re-election. The filing from CtW Investment Group, which advises union pension funds, said Board Chairman Michael Sovern and the two other committee members failed to take decisive action against James Murdoch after News Corp.’s phone-hacking scandal.

‘Train Wreck’

Although News Corp.’s deputy chief operating officer resigned from the auctioneer’s board in March, “Sotheby’s directors were passive bystanders to a slow-motion train wreck,” leaving it to Murdoch to voluntarily step down from the board shortly before the proxy’s publication, the CtW filing said.

Glass Lewis countered that Murdoch’s departure “may signal an appropriate level of responsiveness to shareholder concerns on the part of the board.”

Glass Lewis nonetheless said shareholders should be “mindful” of issues that CtW raised. ISS cited a “distressing level of passivity” by the committee in accepting several of Ruprecht’s suggestions for new director candidates.

“There is an inherent conflict of interest in senior management identifying candidates for the job of overseeing senior management,” the ISS report said.

Diana Phillips, a Sotheby’s spokeswoman, said Sotheby’s doesn’t agree with ISS’s opinion about the committee.

‘Carefully Vetted’

“Recommendations for board candidates come from many quarters and they are all carefully vetted and go through the same rigorous process,” she said in an e-mail.

The nominating committee “follows the highest standards of corporate governance,” she said.

Wednesday, Sotheby’s will hold its evening contemporary art sale. Last week, it sold a version of Edvard Munch’s “The Scream” for $119.9 million, the highest price ever paid for an artwork at auction.

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