Comparing Sotheby’s to “an Old Master painting in need of restoration,” hedge-fund manager Daniel Loeb called on the auction house’s chief executive officer, William Ruprecht, to resign.
Loeb, 51, said he will seek a board seat, has begun an informal search for outside candidates and is aware of at least two internal candidates “who warrant serious consideration” to replace Ruprecht as CEO. He detailed his requests in a letter to the chief executive disclosed in a regulatory filing today.
Loeb also revealed that his firm Third Point LLC increased its stake in Sotheby’s to 9.3 percent. The billionaire activist is ratcheting up pressure on the New York-based auction house, criticizing the company’s international operations, “deteriorating” competitive position versus rival Christie’s International Plc, and executive compensation.
“We acknowledge that you, Mr. Ruprecht, were an able steward for the company following both the price-fixing scandal in 2000 and the financial crisis in 2008,” Loeb said in the letter. “Unfortunately, you have not led the business forward in today’s art market,” particularly contemporary and modern art.
The hedge-fund firm disclosed a 5.7 percent Sotheby’s stake in an Aug. 26 filing. Last month, Sotheby’s said that it’s “conducting a thorough review of its capital allocation and financial policies,” and announced that Patrick McClymont, a partner at Goldman Sachs Group Inc., would replace its chief financial officer of 17 years, William Sheridan.
“We have concluded that Sotheby’s malaise is a result of a lack of leadership and strategic vision at its highest levels,” Loeb said in his letter to Ruprecht. “Our research suggests Sotheby’s crisis of leadership has created dysfunctional divisions and a fractured culture.”
In a statement, Sotheby’s cited its “superior results” and noted that its shares outperformed the Standard & Poor’s MidCap 400 Index over one, five and ten years. It omitted that in three years, the shares returned about 40 percent, compared with 63 percent for the benchmark. Or that they remain more than 10 percent below their all-time high, set five years ago.
Loeb cited “weak operating margins” and wasteful spending. He said there was “little evidence” to justify Ruprecht’s 2012 pay package of $6.3 million plus equity awards.
Ruprecht, CEO since 2000, is also president and chairman -- a title Loeb wants separated from the CEO role.
Activist funds generally acquire equity stakes in companies and try to force corporate management to make changes that boost share prices and investor returns.
-- With assistance from Jeffrey Burke in New York. Editors: Julie Alnwick, James Callan