Proxy Fight Turns Bitter at Sotheby’s

Activist investor Daniel Loeb has begun a bare-knuckle proxy fight to secure three handpicked appointees to the board of Sotheby’s—including himself and jewelry veteran Olivier Reza.

Loeb, founder of investment firm Third Point, which in the last year has become the auction house’s biggest investor with a 9.3 percent stake, said in an SEC filing in favor of the new directors that Sotheby’s is suffering from a “dysfunctional corporate culture.” 

“Sotheby’s sorely lacks innovation and creativity at its most senior levels and requires an infusion of leadership, accountability, and transparency,” Loeb said, arguing that it has lost market share to competitor Christie’s and failed to control expenses. The filing took particular aim at the compensation of chairman, president, and CEO William Ruprecht, which it called high given the company’s size, with perks that are “throwback to a bygone era.”

The Third Point slate, the fate of which will be decided at a Sotheby’s May 6 annual meeting, includes Loeb, restricting expert Harry J. Wilson, and Olivier Reza, chairman of Reza Gem, a French jewelry company.

Sotheby’s 12-person board shot back in a filing that similarly didn’t mince words, arguing that settlement talks with Third Point were underway that would give Loeb a seat on the board, when the investor launched an “abrupt proxy battle.” 

“We believe this action calls into question Mr. Loeb’s ability to work constructively as a director,” it said. 

In a 53-page Powerpoint presentation it filed with the SEC, the board charged that Loeb rarely spends more than two years on boards of directors and dubbed a prior transaction with Yahoo “self-interested.”

Reza’s nomination also received scorn in the Sotheby’s filing, with Ruprecht and lead independent director Domenico De Sole writing they “do not believe jewelry design, as offered by Mr. Reza based on his family’s business, is needed on [the] board.”

The board also said the company has achieved strong financial performance, including record sales in 2013, and has extended its brand into retail sales, including diamonds. (Jewelry currently consists of 10 percent of revenue, the presentation says.)

This proxy fight is not the only ongoing fight between Third Point and Sotheby’s management. On Oct. 5, the board enacted a so-called poison pill that prevents activist shareholders from accumulating more than 10 percent of its stock. On March 25, Third Point filed a lawsuit to enjoin the provision, according to Loeb’s filing.


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