The appointment of Tad Smith as Sotheby’s president and chief executive officer this morning signals the company’s ambitions to generate growth by building a broader brand. “We believe that Tad is a great strategist. He really understands brands and brand building and he is now leading one of the greatest brands in the world,” said Sotheby’s lead independent director Domenico De Sole during a conference call with shareholders this morning.
Sotheby’s also announced its separation of the chairman and chief executive officer positions, with De Sole succeeding Bill Ruprecht as board chairman. Ruprecht had been Sotheby’s chief executive officer since 2000, and chairman of the board since 2012.
Smith, who officially begins on 31 March, has limited arts experience. He has been president and chief executive officer of the Madison Square Garden Company, a sports, media and entertainment business, since February last year. Before that, he was the president of local media for the Cablevision Systems Corporation for five years, prior to which he was the chief executive officer at Reed Business Information, where he was responsible for growing various companies including trade magazines. He is an Adjunct Professor at the Stern School of Business at New York University, where he teaches strategy and finance for entertainment, media and technology companies.
“While the auction business is new to me, I think you will find me to be a quick study,” Smith told investors and analysts during this morning’s conference call in which he outlined his four key priorities for Sotheby’s—which “are exactly what I have done in lots of other businesses”.
His first priority “is to develop and implement a growth strategy. This is a business that has a very large and vibrant market and there are lots of opportunities to grow in it, and that is very exciting to me,” he said. “The second priority is to encourage and accelerate the adoption of technologies in the business. The third one is to allocate capital effectively. The fourth one is to build the processes and people, and shape the organisation in a way that makes the first three sustainable over the long term.”
He says he wants to quickly immerse himself in differing perspectives of the company’s board members, staff, clients and other key art world figures before creating a five-year plan to “enhance Sotheby’s growth and profile and increase shareholder value, including how we go to market and our capital allocation”.
Asked by Stifel, Nicolaus & Co analyst David Schick about the “philosophical difference between the brand and the business”, Smith said that “there appear to be three businesses: one, the financial services business; one is the private market sales; one is the auction business. What I infer is that the brand has already extended in three different ways.”
“My hunch is that when I get closer to the customers, I’m going to learn that the brand means a lot of different things to customers,” Smith said. “So, the question is, what are the key brand attributes… and how can you extend them or create opportunities… or growth avenues.”
He joins after a tempestuous period in the company’s history, following a proxy battle last year between the company and the activist investor Daniel Loeb, whose hedge fund Third Point LLC is Sotheby’s largest shareholder.
There was further discontent this February when Marcato Capital Management LP, Sotheby’s second-largest shareholder, wrote a public letter demanding the company buy back $500m of shares and replace its chief financial officer Patrick McClymont.
The average share in Sotheby’s has fallen 7.4% over the past year, ranging from $34.74 to $45.48. The markets reacted in mixed measure to the news this morning: overall, the value was up though share price staggered between $41.4 as the markets opened to $40.90 as we went to press.