Another missed opportunity
The great Israeli diplomat Abba Eban famously remarked, after the 1973 Geneva Peace Conference, that “the Arabs never miss an opportunity to miss an opportunity.” The same could be said of the Board of the Minnesota Orchestra.
At their annual meeting yesterday, the Board passed on the perfect moment to let the current board chair and immediate past board chair – Jon Campbell and Richard Davis – ride into well-deserved obscurity, and instead re-elected Campbell to stay on, apparently with no discussion of succession planning:
The only discussions were around the intention for Jon Campbell to remain in the chair role until the negotiations are complete,” President and CEO Michael Henson said.
He could be there a long time. It’s an odd kind of accountability that keeps someone in a position for as long as he/she fails at achieving the core responsibility of that position.
It’s interesting, though, that the discussions were about Campbell’s “intentions.” One would have thought that discussions would have been about the health and future of the Minnesota Orchestra Association and whether Campbell was the best leader to advance those. That his “intentions” were more important really does suggest that Campbell and Davis have an unhealthy degree of control over the Board, as I suggested a few months ago. Is his pride more important than getting the musicians back to work?
There were some other items of interest that emerged from the meeting. One was that the MOA spent $885,000 on the negotiations. That’s a figure that is likely to cause every orchestra manager in the country to choke on their morning coffee. Just how much are they paying their lawyers? Negotiations, even smooth ones, are not cost-free for management, although many managements rely on pro bono work for the legal part of the process, especially if they have a management-side labor lawyer on their board. But $885K is a truly astonishing figure.
Another item of note was that, without playing a single concert after the lockout began, the board presided over expenses of over $13 million. The good news, according to Campbell, was that they only ran a deficit of $1.1 million, which he them cited as proof that the lockout was necessary:
The fact that the organization’s deficit is substantially smaller in a year without any performances indicates the degree to which this business model is out of alignment.
The saddest thing about that statement is that Campbell may actually believe it. At the very least, it suggests a gormlessness about nonprofit finances just this side of pathological. Given the size of their endowment, they really ought to be running a substantial surplus. Just what are they spending $13 million on anyway?
Expenses were just more than $13 million, down from $31.5 million in fiscal 2012, which was a normal operating year. That included $2.2 million for musicians’ salaries (the lockout began on Oct. 1, 2012, one month into the fiscal year), and reimbursements to the state for unemployment compensation for musicians, who can draw up to $585 in weeks in which they are not actively finding other employment.
Also listed as an expense was the $961,000 grant the association returned to the Minnesota State Arts Board at the end of June. The orchestra had said it would return the money if there was no contract resolution at the end of the state’s fiscal year. Administrative salaries were cut 24 percent from 2012. Expenses also included $885,000 for costs related to the negotiations.
So the lockout, just in terms of direct outlays, has cost close to $1.8 million in expenses and foregone state funding, plus an unspecified (but likely quite large) sum to the state to pay the musicians unemployment; possibly another million or so if they have to pay dollar for dollar to the state. And the rest? Who knows. No doubt the staffers that Henson likes were treated very well. Maybe they ran lots of experiments to see how long expensive buffets at receptions would last without the musicians grabbing all the food. Perhaps they turned the heat in Orchestra Hall up to 175F in the belief that what would keep Vänskä happy was the world’s largest sauna.
The story of how the board of the Minnesota Orchestra Association allowed three men to drive one of the great American orchestral institutions into a deep, deep ditch will be studied – with fascination and horror – for as long as there is an American nonprofit sector. It’s as if the Board turned a leaky faucet into this – and then voted to go for Niagara Falls.
Update: Looking at the annual report (page 2), it’s clear that the $2.2 million figure for musician costs included the amount MOA reimbursed the state for unemployment payments to musicians. Having said that, there are some numbers in the report which raise interesting questions. Why, for example, did the MOA pay almost 7% more in interest expense this season than last? What did the long-term debt of almost $11 million pay for? Why did the endowment controlled by the MOA (as opposed to funds held by outside entities which are usually lumped in to the endowment total) decrease by $1 million? It’s also clear that the lockout was expensive in terms of what amounted to penalties paid by the MOA for concerts that didn’t happen:
A further $1.1 million in concert-related expenses that were not offset by concert income, as would typically be the case, was incurred as a result of advance marketing for the planned 2012–13 concerts and non- refundable deposits on guest artist fees.
On the other hand, there appeared to be no unusual expenses for utilities, so I guess my sauna hypothesis was off-base.
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The situation fails the smell test on an increasing number of fronts. Cited legal fees seem excessive in a year when really nothing substantive was offered or accomplished. I’m no legal expert, but the MOA handles much of its legal affairs with its usual counsel at Faegre Baker & Daniels (formerly Faegre Benson), including the legal opinions cited for the City of Minneapolis in defending MOA’s meeting of its lease obligations for Orchestra Hall. Whatever investment shortcomings occurred subsequent to the recession of 2007, the economy – well, Wall Street – has done well recently, so we should be hearing more about the positive effects there. By some accounts, MOA’s investments did worse than average in any case. Why? One expects a fairly conservative program with a non-profit that would avoid the most unusual exposures. Not to mention, the potential for occasional economic disruptions should be expected and in this case, anticipated. Are MOA board members and financial staff that bad at business analysis?
I incline to the philosophy of “follow the money”. The size of MOA’s endowment has to profit somebody when invested. Who? How much? How is it being determined? All major arts organizations should be scrutinizing the situation here. If this management team succeeds, they will become a model for others.
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It seems to me that everything is going according to plan for the MOA board and management. They WANT to destroy the orchestra. They have succeeded. They want a new, cheaper orchestra. Cost savings override all other priorities. So of course they want current leadership to stay the course.
For most of us following this disaster, it is unimaginable to purposely lower the musical quality of an ensemble. So the larger community of orchestra-watchers has been slow to recognize artistic diminishment as the board’s goal. We tend to see the MOA as inept, misinformed, or inflexible, and maybe misanthropic, but it hasn’t sunk in yet that they are intentionally undermining the quality of their own product.
You’re right that the board pursues its cost savings with great clumsiness and irrational choices. Inappropriate bonuses, expensive negotiations, and other strange spending show that they are not thinking straight. How could they be? It’s obvious that their priorities are screwy. Why would we expect sane strategies for pursuing irrational objectives?
I should add that making cost savings the prime objective is very common now throughout our society. Education systems are in tatters, for example, because saving money is the overriding priority. What the MOA is doing–saving money by lowering the quality of its product and by hanging employees out to dry–is not that unusual.