U.S. Securities and Exchange Commission
Washington, DC 20549
NOTICE OF EXEMPT SOLICITATION
1. Name of the Registrant:
SOTHEBY'S
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2. Name of the person relying on exemption:
CTW INVESTMENT GROUP
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3. Address of the person relying on exemption:
1900 L STREET, NW, SUITE 900 WASHINGTON,DC 20036
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4. Written materials. Attach written materials required to be submitted
pursuant to Rule 14a6(g)(1):
CTW INVESTMENT GROUP
April 12, 2012
Dear Fellow Sotheby's shareholder:
AT SOTHEBY'S MAY 8, 2012 ANNUAL MEETING, WE URGE YOU TO VOTE NO ON THE
RE-ELECTION OF MICHAEL I. SOVERN, ALLEN QUESTROM, AND DIANA L. TAYLOR, the
incumbent members of the Nominating and Governance Committee up for
re-election. The board's failure to take decisive action and break with James
Murdoch in the face of investor demands, a persistent stream of negative news
flow from the UK hacking scandal and resulting mounting reputational risk to
Sotheby's are only the symptoms of the underlying problem - a flawed
nomination process that fails to identify and recruit credible, outside
directors. In fact, little has changed in this regard since the elimination of
the dual class voting structure seven years ago, with four of the last six
nominees handpicked by the CEO, and the latest appointee, Steven B. Dodge, a
former director dating back to the company's former controlled status. By
voting against incumbent members of the Nomination and Governance committee,
shareholders can send a strong message: rather than rubber-stamping
management's candidates, the committee needs to perform its responsibilities
and obligations and undertake a thorough search for a new crop of independent
directors with the assistance of an outside search firm.
The CtW Investment Group works with pension funds sponsored by unions
affiliated with Change to Win, which collectively hold $200 billion in assets.
Since many of these funds own Sotheby's through index funds and are unable to
sell regardless of board or management concerns, robust governance and
director accountability are paramount. Troubled by the concerns being raised
over James Murdoch's judgment, oversight and conduct at News Corp. in the wake
of the phone hacking scandal at the News of the World, the CtW Investment
Group last fall started calling on the Sotheby's Nominating and Governance
Committee to take decisive action and break with James Murdoch.
THE JAMES MURDOCH DEBACLE
Despite a clear basis for action in its corporate governance guidelines and
the repeated urging from investors, Sotheby's directors were passive
bystanders to a slow motion train wreck, leaving it up to James Murdoch to
voluntarily step down on the eve of the proxy statement's publication. As
early as late summer 2011, it should have been obvious that his position on
the board was untenable given widespread concern for his ethical conduct,
integrity and business judgment - key director attributes outlined in
Sotheby's governance guidelines - in handling the phone hacking scandal at the
News of the World. Alleged inconsistencies in his testimony before a British
Parliamentary Committee investigating the matter had sent his credibility into
free fall. Lord Myners, an authority on UK corporate governance and the former
chairman of Marks & Spencer plc, told the British House of Lords in mid-July
there were sufficient doubts about his business judgment that he should resign
from BSkyB. Sir Christopher Bland, former Chairman of the BBC and BT Group
plc, echoed these concerns in The Financial Times, writing that "James
Murdoch's 'willful blindness' showed at best a lack of curiosity, and at worst
a failure to ask questions, for fear of hearing unacceptable answers."
Yet the board continued, even after his historic rejection by outside
shareholders at News Corp., where 75% of independent shareholders voted
against his re-election to the board, to insist on calling James Murdoch a
"valued member of the board," unnecessarily exposing Sotheby's to
1900 L Street NW, Suite 900 Washington, DC 20036 202-721-6060
www.ctwinvestmentgroup.com
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months of negative media attention. Despite repeated calls from the CtW
Investment Group, widespread media commentary on his increasingly tenuous
position at GlaxoSmithKline, Sotheby's, and his eventual departure from the
former and resignation from the latter, our board took no action. It is
perhaps instructive to note that James Murdoch was recommended to the board by
John Angelo, whose son, Jesse Angelo, is a childhood friend of James Murdoch
and editor-in-chief of New Corp.'s "tablet tabloid" The Daily.
There is an unwelcome sense of deja vu for shareholders in the board's
handling of James Murdoch. Eight years ago, despite the specter of civil fraud
charges hanging over him for months, Conrad Black was allowed to step down on
his own accord from Sotheby's board, the last of his outside directorships, at
the AGM. In both cases, the board appears to have shown deference and loyalty
to these directors, and not to shareholders. Conrad Black later served three
years in federal prison for fraud and other charges relating to is media
empire, Hollinger International. Unfortunately, this experience highlights
that the James Murdoch saga is only a symptom of a broken nominating and
evaluation system, rather than an isolated event.
A BROKEN NOMINATION SYSTEM
The quality of independent oversight on a board is, in many respects, only as
good as the independence and rigor of the underlying nomination process; this
is the Achilles heel of Sotheby's governance. The identification and
recruitment of qualified candidates retains the trappings of the company's
previous controlled status and betrays the influence of insiders in selecting
new members. Leaving aside the peculiarities behind James Murdoch's
appointment, the last four new recruits to the board - Daniel Meyer (appointed
2011), Marsha Simms (2011), John Angelo (2007) and Diana Taylor (2007) - were
all initially recommended for consideration by the CEO. The result is
essentially the same selection process under which longer serving directors
were first appointed prior to the elimination of the dual class stock
structure and the controlling interest of the Taubman family. Clearly, old
habits die hard. The decision to nominate a former director, Steven B. Dodge
(2000 - 2007), to fill a current vacancy simply underscores the dysfunction of
the current process.
Sotheby's Broken Nomination Process
Name Age Director Nominating Nomination Concern
Since Committee
Member
John M. Angelo 70 2007 Recommended by CEO
Michael Blakenham 74 1987 Has served on the board for 23
years; appointed as a director
while the company was private
and under the control of the
Taubman family.
Steven B. Dodge 66 Nominee Former director serving on the
board from 2000-2007.
Nominated to replace James
Murdoch following his recent
resignation.
The Duke of
Devonshire 67 1994 Has served on the board for 18
years; appointed as a director
while the company was under
the control of the Taubman
family.
Daniel Meyer 54 2011 Was recommended by CEO
ALLEN QUESTROM 72 2005 YES WAS APPOINTED AS A DIRECTOR IN
DECEMBER 2004.
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This is not a solicitation of authority to vote your proxy.
Do not send us your proxy cards as it will not be accepted.
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Name Age Director Nominating Nomination Concern
Since Committee
Member
William F. Ruprecht 56 2000 CEO since February 2000. He
joined Sotheby's in 1986 as a
Director of Marketing.
Marsha E. Simms 59 2011 Ms. Simms was recommended to
the committee as a result of
senior management's
familiarity with her as legal
counsel to the company for
corporate financing
transactions over many years.
MICHAEL I. SOVERN 80 2000 YES (CHAIR) HAS SERVED AS CHAIRMAN OF THE
BOARD FOR 12 YEARS; APPOINTED
AS A DIRECTOR WHILE THE COMPANY
WAS UNDER THE CONTROL OF THE
TAUBMAN FAMILY.
Robert S. Taubman 58 2000 Son of former Executive
Chairman Alfred Taubman who was
imprisoned in 2002 for anti-
trust violations following a
price-fixing scandal.
DIANA L. TAYLOR 57 2007 YES RECOMMENDED BY CEO
Dennis M. Weibling 60 2006 Recommended by Mr. Dodge to the
Board. Messrs. Dodge and
Weibling had jointly served on
Sprint Nextel earlier in the
decade.
**James Murdoch 39 2010 Yes Appointed because of friendship
with fellow director, Mr.
Angelo; Murdoch resigned on
March 14, 2012.
THE RISK TO INVESTORS
Sotheby's may occupy a niche of the specialty retail industry, but with close
to a billion dollars in revenue and $2.5 billion in market capitalization,
just like any other major public company, we believe that it needs to be
overseen by critical mass of outside directors recruited in an objective,
independent manner. In fact, this is even more critical at Sotheby's in light
of the notorious price fixing scandal a decade ago that resulted in anti-trust
convictions for former Chairman Alfred Taubman and former CEO Diana Brooks and
hundreds of millions of dollars in fines and settlement costs.
RECOMMENDATION: VOTE "NO" ON DIRECTORS MICHAEL I. SOVERN, ALLEN QUESTROM, AND
DIANA L. TAYLOR
We urge you to join us in opposing the re-election of directors MICHAEL I.
SOVERN, ALLEN QUESTROM, AND DIANA L. TAYLOR, the incumbent members of the
Nomination and Governance Committee, at Sotheby's May 8, 2012 annual meeting.
In light of the breakdown in the nominating process, we are also asking
Sotheby's to retain the services of a search firm to identify qualified
independent candidates to the board.
Sincerely,
Richard W. Clayton III
Research Director
______________________________________________________________________________
This is not a solicitation of authority to vote your proxy.
Do not send us your proxy cards as it will not be accepted.