Sotheby's Pres Gets New Contract

Philip Boroff writing for Bloomberg reports Sotheby's Chief Executive William Ruprecht has a signed a new contract with plenty of incentive clauses.  His base pay will remain the same at $700,000.00 per year, but if all incentives and marks are hit, the new contract and annual compensation could total $8 million a year.  The four year agreement could total $32 million.

Sotheby’s Chairman Michael I. Sovern stated that if the full amount of the contract is earned, Sotheby's shareholders would be very happy.

It is nice to see that the compensation is based upon the success of the auction house.

Boroff writes

Auction houses started reviewing costs as the art market shrank after the collapse of Lehman Brothers Holdings Inc. Ruprecht took a one-third pay cut in his package last year, to $2.4 million, as Sotheby’s cut staff and lost $6.5 million, its worst result since 2003. On Aug.5, it reported that second- quarter earnings were seven times that of a year earlier as the art market recovered.

Effective Sept. 1, the contract leaves Ruprecht’s basic salary unchanged at $700,000. He’s to be paid an “annual target bonus” of $1.4 million cash, with a maximum $2.8 million depending on “performance and other metrics” set by the company’s compensation committee. In addition, Sotheby’s will grant him “performance share units” worth $3.5 million to $4.5 million that vest over time, also contingent on performance.

Sovern said neither the cash bonus nor performance shares is guaranteed.

Shares Double

The shares have almost doubled in the past year. Closing yesterday at $29.14, they remain about half their Oct. 10, 2007, peak of $57.64.

Sovern said Ruprecht has “a wonderful strategic sense,” navigating well in good times and bad. He points out that Ruprecht purged employees twice -- last year and after he took over in 2000, following a price-fixing scandal.

“To cut a significant fraction of the workforce without damaging operations and morale, that’s very hard,” Sovern said. “He’s done it twice, with enormous success.”

To read the full Bloomberg article, click HERE.