April 4 (Bloomberg) -- Dan Loeb urged shareholders of Sotheby’s to vote for three new directors his hedge-fund firm Third Point LLC has proposed for the board, saying the auction house requires fresh leadership.
Loeb, 52, said the current directors don’t own enough stock in the company to ensure their interests are aligned with those of shareholders, according to a letter published today. During the time the hedge fund built its 9.6 percent stake, two directors, including Chief Executive Officer and Chairman Bill Ruprecht, have been selling shares, Loeb said.
“The company’s slide is a consequence of failed leadership by a board of directors who collectively own a scant 0.87 percent stake in the company,” Loeb said in the letter. “Their lack of ‘skin in the game’ has led to a dysfunctional corporate culture overly focused on short-term metrics such as auction volumes at the expense of long-term investment in key areas.”
Loeb has been criticizing Sotheby’s management and deteriorating competitive position relative to rival Christie’s for months. Today’s letter extends his attack to the board of directors of the company, which adopted a shareholder-rights plan, known as poison pill, to protect itself from hostile takeovers after Loeb started his campaign last year.
Loeb in February proposed three new directors to Sotheby’s board, including himself, Harry Wilson, who helped restructure General Motors Co., and jewelry designer Olivier Reza. Sotheby’s rejected his proposal in March, saying the nominees don’t add relevant skills.
Sotheby’s said this month it’s sending a letter to shareholders, asking them to vote for its 12 nominees to the board of directors at the annual meeting on May 6.
“Mr. Loeb’s actions at Sotheby’s and his ‘experience’ serving on other company boards - which averages less than 2 years - raise doubts about whether he will put the interests of all Sotheby’s shareholders ahead of his own,” Andrew Gully, a spokesman for the auction house, said in an e-mailed statement responding to Loeb’s letter today.
Third Point has sued Sotheby’s and its board in Delaware Chancery Court, saying that the poison pill is being employed to impede a proxy contest and maintain the status quo. The court set a preliminary injunction hearing for April 25, before Sotheby’s planned annual shareholders meeting, according to the letter.
Loeb said Sotheby’s needs improvement in the areas of talent development, client relationships and technological infrastructure.