The CtW Investment Group, an adviser to many union-sponsored pension funds (including the still-locked-out Sotheby's art handlers) sent out a public notice to shareholders through the Securities and Exchange Commission, accusing the Sotheby's board of favoritism and an unchanged internal structure since going public. The filing notes that four of the last six board members elected were nominated by CEO William Ruprecht (who earned $6 million last year), an executive that the board is in charge of overseeing, according to Sotheby's own internal guidelines. Is it justified for someone to choose their own superior? Well that is the business ethic that CtW is taking a stand on publicly, and wants the buyers and shareholders of Sotheby’s to take notice of.

The company was privately controlled by the Taubman family a decade ago, but after a price-fixing scandal with rival auction house Christie's they went public. Today, CtW is urging stockholders to vote against the re-election of three Sotheby's board members as these figures are on the board's "nominating committee," in charge of naming potential new candidates.  In order to change the current structure, those members need to be removed, and an independent search firm to nominate candidates should be used CtW is stipulating.

As an example for the failings of the current structure, the CtW’s filing cites the failure of the Sotheby's board to expel James Murdoch, who served as a member until stepping down last month, after he became involved in the News of the World hacking scandal. The airing of such grievances publicly is surely meant to send a statement and make buyers aware of Sotheby’s business practices, but are the practices really that abnormal for a corporate business?

Boards of directors are generally populated by elite business professionals, and the act of bringing in new individuals with expertise and knowledge who are not adjusted to the other board members can be difficult and create hostilities. While the current structure of the Sotheby's board may not be good practice, it is common enough throughout the corporate world. The difference however, that CtW insists, is that such practices reflect poorly on the auction house's business, which in turn hurts shareholders. As Sotheby's is a public entity with a $2.5-billion market capitalization, the CtW believes that outside recruitment is necessary for Sotheby’s to remain objective and independent.

This filing, when taken in accordance with the current Sotheby’s lock out of their art handlers, is certainly tarnishing Sotheby’s reputation. The unionized workers have been locked out since August of 2011 over a contract dispute in which Sotheby's was asking for the elimination of certain senior positions, such as general foreman and deputy foreman, and the replacement of 12 senior union workers with non-union workers. The auction house also proposed shortening the handlers' work week by 2.5 hours. The union, in turn, was hoping to eliminate all non-union workers and restore the art handling staff to a full roster of 60 union members. Unable to settle, the union walked out and Sotheby’s brought in temporary replacement workers, during which union employees are unable to work or collect paychecks.

Such business practices are common in corporate America, but no matter your viewpoint on business ethics, image and publicly for a company is vital in the art world. With so many other competitors that have fewer to none corporate grievances, will Sotheby’s survive this onslaught unharmed?

Information obtained from ArtINFO articles:

Investors Slam Sotheby's Corporate Board for Incestuous Governance, Calling for a Shake-Up by Shane Ferro

Will the Teamsters Strike Sotheby's? The Head of the Art Handlers Union Discusses the Touchy Negotiations With the Auction House