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Big Learning Curve for Sotheby’s New CEO in a Season of Lowered Expectations: My Q&As

With art-market pundits expressing cautious pessimism (here, here and here) about the prospects for this week’s underwhelming Impressionist/Modern and Contemporary offerings at the New York auction houses, it’s not the most auspicious of times for Sotheby’s to be seeking solid footing after a management upheaval—a new owner, Patrick Drahi, and new CEO, Charles Stewart.

At last week’s very sparsely attended press preview for this week’s major auctions, I got a chance to chat about Sotheby’s era of uncertainty with four of the company’s principles—CEO Stewart; August Uribe, vice chairman and head of the Department of Impressionist and Modern Art; Lisa Dennison, executive vice president and chairman, Americas (and former director of the Guggenheim Museum); Simon Shaw, vice chairman, Fine Arts Division.

Stewart won me over at “Hello,” just by showing up at the press preview at a time when he’s still just learning about the business and the players:

L to R: Charles Stewart, Sotheby’s new CEO, with Lauren Gioia, director of communications, & Grégoire Billault, head of Contemporary Art Department
Photo by Lee Rosenbaum

He then scored more points by resisting a well-intentioned attempt to protect him from being badgered by my questions.

“We’re just saying hello this morning, so we’ll set up another time,” Sotheby’s veteran communications head told me.

But CultureGrrl wasn’t giving up that easily. Here’s how it went:

ROSENBAUM: Can I ask one question?

STEWART: Yes, sure.

ROSENBAUM: In what ways do you think operations here at Sotheby’s—vis à vis the art, the specialists and the way sales are structured—are going to possibly change under the new management?

STEWART: It’s honestly a little early for me to say that. Part of the reason for starting now is to observe Sotheby’s doing what it does best in this two-week period. It’s been very immersive for me in that regard. But our strategy is clearly going to be to grow [emphasis added].

It seems to me there is a lot of space in this market beyond the core elements that we do very well with together with Christie’s and a couple of other prominent auction houses. So the question is how do we go after those opportunities and I’ll have a lot more to say about that in a few weeks, after the auctions.

ROSENBAUM: Can you say what you mean by those “opportunities” and in what ways is there a potential for growth?

STEWART: I haven’t even communicated it internally, so I don’t really want to start by entering that in a press question, but Patrick (Drahi)’s vision for the business is certainly around growth and expansion. In the spring auctions, we’ll have a lot to talk about.

One pressing question is whether Drahi’s reputation as a cost-cutter may winnow the already reduced ranks (here and here) of its senior art specialists—the rainmakers who know where and how to harvest star lots for future sales.

In their recent analysis for Bloomberg, Katya Kazakina, Sally Bakewell and Angelina Rascouet identified a key way in which compensation for specialists could be trimmed:

According to a presentation given to potential buyers of bonds to finance the [Sotheby’s] acquisition that was seen by Bloomberg [which I was unable to obtain], Drahi plans to achieve $66 million in cost savings at the auction house, amounting to about 43% of adjusted earnings before interest, taxation, depreciation and amortization in the second quarter. A big portion of that—some $31 million—reflects the end of share-based compensation [emphasis added].

Eliminating stock payments is to be expected, given the company’s new private status. However, it remains to be seen how much, if any, of these funds resurface as another form of compensation.

So let’s hear from one of Sotheby’s most august specialists—August Uribe, head of the Impressionist/Modern Department and vice chairman, Fine Arts Division, whose big sale of the season comes up tonight, following a solid but underwhelming Imp/Mod sale last night at Christie’s. (“Respectable and workmanlike” is how veteran art-market scribe Judd Tully described that Christie’s sale in his post mortem for ARTnews.)

Uribe’s tasty take on the new Sotheby’s could be flavored by inside knowledge, with a dash of wishful thinking.

August Uribe with Signac’s “La Corne d’Or (Constantinople),” 1907 (est. $14-18 million)
Photo by Lee Rosenbaum

ROSENBAUM: What has the new management communicated to the specialists?

URIBE: Basically, new management is extraordinarily happy to be on board and wants to maintain what I would call the status quo vis à vis the specialist departments and how we’re being staffed. So they’re very much in favor of keeping the specialist staffs as they are, in both decorative arts and the fine arts departments, and most likely augmenting them. There’s a deep commitment to expertise.

We’re always going to be very compliant vis à vis how we do our business, but I think one thing that is going to be working in our favor [as a result of going private] is that we’re going to be more nimble as a corporation [emphases added].

ROSENBAUM: What does “being more nimble” mean, specifically?

URIBE: I think that when you’re dealing with competitive situations, when you’re trying to get a decision for a guarantee or irrevocable bid or getting consensus on pricing, we’re going to be moving a lot faster.

ROSENBAUM: And making more advantageous offers to consignors?

URIBE: Absolutely.

ROSENBAUM: But what about the bottom line and the fact that you’ll be giving away more than you would have done in the past and possibly reducing profitability? [I detailed those risks in this post: Race to the Bottom? What a “Private” Sotheby’s Might Really Mean.]

URIBE: I think that the bottom line is going to figure largely in how we do business because we are, in fact a business, we’re not a not-for-profit. But having said that, being able to be nimble will enable us to make good decisions quickly.

Now on to Lisa Dennison, with whom I go back a long way—to her days as a Guggenheim Museum curator and director and my days as…a pesky reporter. She’s now Sotheby’s executive vice president and chairman, Americas:

L to R: Lisa Dennison, Charles Stewart, Lauren Gioia at last week’s press preview
Photo by Lee Rosenbaum

ROSENBAUM: Can you tell me how you think things are going to change in the next year, in light of all the changes in the administration here?

DENNISON: I don’t know how the art market’s going to do. I don’t know what Sotheby’s going to do. Charlie joined us on Monday—a nice guy; looking forward to hearing his ideas. But I don’t know! I think, like any good CEO, he is just trying to listen and learn. He’s not from this industry and neither was Tad [Smith, Stewart’s predecessor], so he is listening and learning. I don’t think you need an art background to run a company.

ROSENBAUM: But before Tad, they did have a background in the art industry.

DENNISON: Well, Bill Ruprecht grew up at Sotheby’s. He started in the rug department. He graduated through the system.

ROSENBAUM: Does it matter? You’re the art veteran.

DENNISON: Do I think it matters? I think what’s important is that you have a great team of specialists who know the art. He’s running a very large, no longer public company. I don’t think you need an art background for that. I think you need to have great people around you, and it’s not the hardest thing to learn.

He doesn’t have to learn about Brice Marden per se. He needs to understand the industry [emphasis added]. But he doesn’t need to understand the specific dynamics of why that is a great “post-and-lintel” Brice Marden [referring to Lot 9 in Sotheby’s evening Contemporary sale, estimated to bring $10-15 million]. That’s for us to do. I think he’s a super-smart guy. I think we are all looking forward to working with him.

ROSENBAUM: What changes are you hoping for?

DENNISON: I don’t know. I’ve only worked for Sotheby’s as a public company. Everybody says there are advantages to being private and I’m waiting to see what those are.

ROSENBAUM: What do you think the might be? Everyone uses the word, “nimble.”

DENNISON: Of course, it’s speed of decision-making, less layers—all of those things, which I think will help because it’s a fast-moving, fast-paced business. I remember Larry Gagosian saying, “If you snooze, you lose.”

ROSENBAUM: What about the danger of making deals to get consignments that will be disadvantageous. There was a certain amount of restriction on that because of the public nature of the company. They said you couldn’t get the David Rockefeller Collection because you couldn’t give the deal that Christie’s did. [This was told to me by Sotheby’s own executive vice president, Hugh Hildesley.]

DENNISON: It wasn’t giving the deal. It was the length, probably, of the time-out [i.e., how long it took to make decisions]. I honestly don’t know what our deal-making strategy will be. We’ve got to give these guys a chance.

I think it’s great that we’re all starting a new season together. It’s not trial-by-fire, but the immersion of these two weeks will be very useful. I think he [Stewart] recognizes the value of the specialists and will indeed respect their wisdom. We’re all anxious to be as open and helpful as possible with any questions he has.

Maybe so, but it sounds like arch-rival Marc Porter, chairman of Christie’s, Americas, could be licking his lips. In her NY Times piece about the changes at Christie’s chief competitor, Robin Pogrebin quoted Porter’s analysis of the price that Drahi paid to take Sotheby’s private and the new owner’s choice of an outsider from the communications field (Drahi’s Altice USA) as its new CEO.

Marc Porter
Photo by Lee Rosenbaum

Porter told Pogrebin that the changes at Sotheby’s marked “a pronounced chasm in the way we’ve been doing business….If you pay that much for the business [my link], you have to have a different view of the amount of profit it can create that is commensurate with the communications and entertainment business, not the fine art business….It feels like they are choosing that digital-and-entertainment road as an alternative to the fine-art road.”

That feels like a not-so-subtle jab at an adversary, landed by a savvy art-market pugilist.

Meanwhile, deposed CEO Tad Smith must be feeling a tad blindsided by recent events. In the Sept. 5 press release announcing shareholder approval of Drahi’s proposed acquisition of Sotheby’s, Smith had cheered:

This is an historic moment for Sotheby’s and we are very pleased to have the validation of the company’s shareholders [emphasis added].

The company’s plans may have been “validated,” but Smith ultimately wasn’t: On Oct. 28, he was shown the exit door “effective immediately,” albeit with a severance sweetener “worth more than $28 million,” according to Pogrebin’s article. Like Stewart, Smith lacked art-business experience—a deficiency manifested in both subtle and serious ways. (Also replaced in Drahi’s sweep of the executive suite was CFO Mike Goss.)

Of the Sotheby’s officials I interviewed last week, Simon Shaw, the usually loquacious vice chairman, Fine Arts Division, was the most frustratingly circumspect:

Simon Shaw

ROSENBAUM: How do you think things will change?

SHAW: I’d rather not comment on it. It’s early days, to be honest. I don’t have an opinion on it. It’s exciting! Change is good.

Maybe…or maybe not. Time will tell.

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