Auctions USA

Sotheby’s bosses get 125% pay rise

Shareholders expected to approve packages for top five executives

Six-million dollar man: Sotheby’s chief executive William Ruprecht

NEW YORK. Sotheby’s is seeking approval from its shareholders for a $15.3m pay package for five of its executive officers for 2010. Details are given in the firm’s proxy statement, issued in advance of its Annual General Meeting (AGM) on 5 May.

The total compensation, up 125% from $6.8m in 2009, includes base salaries, plus other annual remunerations such as cash incentive bonuses and awards of Sotheby’s shares. These additional perks take the total level of pay to at least five times these executives’ base salary, and nearly nine times for the chief executive William Ruprecht.

The breakdown of total remuneration for 2010 is: $6m for Ruprecht, up from $2.4m in 2009; $2.5m for William Sheridan, chief financial officer (2009: $1.1m); $3m for Bruno Vinciguerra, chief operating officer (2009: $1.5m); $2.1m for Kevin Ching, chief executive of Asia (2009: $1.1m); and $1.7m for Robin Woodhead, executive vice president and chairman of Sotheby’s International (2009: $775,000).

Also included in the AGM proxy are details of “other compensation”. These include “automobile-related expenses, including driver’s compensation” for Ruprecht of $59,952; “club dues” of $29,329 for Sheridan and “parking fees” of $5,874 for Woodhead.

Sotheby’s management “pays itself relatively well compared with companies with similar revenue”, said Wall Street analyst Aaron Mo at JMP Securities (Sotheby’s 2010 revenue was $774.3m). Other US chief executives at the $6m total compensation level for 2010 include David Mackay, chief executive of Kellogg (2010 revenue: $12.4bn); Mark Pigott, chief executive of truck manufacturer Paccar (2010 revenue: $10.3bn) and Michael McCallister, who heads up US health insurance group Humana (2010 revenue: $33.9bn). The average increase on 2009 pay for top executives at 200 major US companies was 12%, according to a study conducted by US compensation consulting firm Equilar. All the named Sotheby’s executives saw an increase of over 90%.

Diana Phillips, a spokeswoman for Sotheby’s said: “I’d imagine there is a rather short list of companies with similar performance metrics, both in the stock price appreciation and [profit] margins that Sotheby’s achieved in 2010, where the pay as a percentage of revenues is materially lower.”

Sotheby’s shareholders can be expected to approve the vote on executive compensation, given the recent share price performance and the fact that its executives agreed a reduction in base salaries in 2009. Phillips said: “The company had a superb year in 2010, the best in our history, with the exception of the peak year of 2007… Critical contributors to this success were the focused approach on cost discipline and margin management as well as a much lower risk profile, all initiatives led by [William] Ruprecht and implemented…by the other named executives.”

The investment community agrees. “[There’s] probably not a lot of backlash in such a rising art market,” said Rommel Dionisio at Wedbash Securities: in 2010 Sotheby’s stock rose from $23.40 at the beginning of the year to $45.20 at the calendar year end. As we went to press, the shares were at the $48 level and analysts have an average target price of $58.50. Individual sales impact—sometimes dramatically—on Sotheby’s share price. Consequently, the auction house’s performance at its key impressionist, modern and contemporary sales (which straddle the AGM, 3-11 May) can be expected to have an effect. “The next catalyst for the stock is May,” said Peter Keith at JMP Securities.

At Christie’s, which is not a publicly listed company, the comparative remuneration package for chief executive Steven Mur­phy is not available and the company declined to comment.

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Comments

16 Sep 11
19:32 CET

RENE, WASHINGTON

Sotheby's locked out its art handlers too. Sotheby's wants to replace its art handlers with temporary workers instead of having to negotiate a fair contract that gives these hard workers benefits and a livable wage.

31 May 11
5:15 CET

A.M., CHICAGO

Rose is so right-as a former employee I can say I did not make a living wage and I have a doctoral level education.

11 May 11
22:31 CET

TIM W., NEW YORK

For a firm with those revenues, these compensation figures are way too high. If I owned the stock, I would take my profits now and not look back. This is another example of a firm that appears to be run for the benefit of the management and not the shareholders and other stakeholders.

9 May 11
16:53 CET

ROSE., TUNBRIDGE WELLS

I wonder if the general staff and art experts at these auction houses are well paid for all their hard work or if they are overlooked to ensure the shareholders and upper echelons are well paid? I should imagine the staff are like slaves on the old galleon ships ... rowing for all they are worth to keep the ship moving forwards while the captain stands aloft and smiles in pride ... I often wonder if big companies remember who does the real work ..... and rewards them accordingly?

7 May 11
20:24 CET

MATTHEW WESELEY, NEW YORK CITY

I stopped by Sotheby's today to view the works in their upcoming auction of contemporary art. They were being picketed by the District 9 Local Union of Painters, since Sotheby's hired non-union workers to paint and maintain their interior spaces. This is one way they have cut costs, I guess. I'd prefer they paid their workers a living wage with proper benefits and paid their top executives less.

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