The Art Newspaper

Sotheby’s bosses get 125% pay rise

Shareholders expected to approve packages for top five executives

By Melanie Gerlis. Market, Issue 224, May 2011
Published online: 04 May 2011

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.