The New Yorker has an article on Ronald Perelman's sudden resignation from Carnegie Hall's board, a few months after becoming its chair, following a conflict with Carnegie's long-time executive and artistic director Clive Gillinson, "citing a frustration in attempting to obtain from Gillinson “a full picture of Carnegie Hall’s financial operations, especially as it related to profits and losses involving performances.”", to use the wording in the New Yorker.
The issue, according to a New York Times article, extended in fact beyond “profits and losses involving performances”, although that seems to have been of particular importance to Perelman. And why not? I am not sure if the information would have been useful, but isn't it valuable knowledge to have in order to gain a clear picture of the institution's financial health?
We also learn that: "Noting that the Warner Music Group is owned by a company founded by Len Blavatnik, who sits on Carnegie’s board, Mr. Perelman began raising questions about whether the arrangement had been properly vetted for potential conflicts of interest, since it was effectively promoting the name of a business controlled by a board member."
Although the New Yorker article appears geared toward primarily insulting and/or antagonizing Perelman behind vague generalizations about donors, I find it deeply insulting to today's major donors. The paragraph is worth stating in full (emphasis is mine): "That Weill and Perelman come from the world of high finance is a crucial element in the problems at Carnegie and elsewhere. Thirty years ago, arts boards were dominated by figures from the corporate world—people who were principally engaged in building things, and who had deep knowledge about, and concern for, the maintenance of large institutions. Many of them also had an abiding love of classical music. But in the ensuing decades, leadership has passed to a class of wealthy persons whose love of the art is less profound and whose background in speculation and finance leads them to expect a return, sometimes an immediate return, on their investment—a mindset that often leads such people to remake or destroy companies and institutions, not cherish them."
Someone please explain to me - dumb little me with my PhD in Electrical Engineering and Computer Science from MIT - about how asking about profits and losses at the institution you have a legal obligation to oversee with care (as board chair) amounts to "expect a return, sometimes an immediate return, on their investment." I read the line about such people not cherishing arts institutions as: shut up and give money, you 1% people who don't really understand classical music. It seems to me that the New Yorker article suggests that, if as a major donor you want to make sure your money is used in the best possible way and offer (forceful) suggestions, that means you are a traitor who does not Cherish the Great Cause.
This completely misreads the atmosphere of the time, where major donors are reluctant to be the only ones paying to realize the grand vision of executive and artistic directors. This translates into the current trend of setting up most gifts as challenge gifts/grants (recommended by Michael Kaiser formerly of Kennedy Center in his many books), where donors match donations on a pre-specified ratio. Major donors don't want to blissfully sign the checks that other people will spend without checks and balances anymore. It is so easy for arts institutions to dream that wealthy people should blindly support their case. But they earned their money and they have a right to check that it is well spent.
Apparently people teetered on the brink of heart attacks when Perelman suggested to bring more pop acts to Carnegie. Now, I'm not sure it's a good idea, and Perelman is described as too forceful and authoritarian a decision-maker to be effective in a performing arts context, but Perelman later backtracked. Either board members are expected to make suggestions and the executive artistic director decides whether to implement them, or they are expected to rubber-stamp whatever the artistic director comes up with, but I'm not sure there is a middle ground on that one. If the institution ever hits difficult times, the rubber-stamping will be Exhibit A of the board's incompetence. The media will have a field day claiming that board members were "asleep at the wheel" or too busy enjoying the social side of board membership to pay attention to the numbers they were presented with. Perelman tried to do the right thing, albeit in a very misguided way. Maybe a more balanced article would not have been too much to ask from a publication such as The New Yorker.
The problem for me was more that Perelman suspended Gillinson without asking for the input of the rest of the board. We live in a time where the authoritarian mode of leadership has fallen out of fashion. When an accomplished leader forgets to build support for his ideas, he is quickly pushed out. This is what we observed here.
The other problem is that performing arts organizations today want a lot of money to do what they want to do, and there aren't too many people with the sort of money they want. But to have that sort of money today, you are probably a very successful entrepreneur rather than someone who inherited a fortune from daddy. People who have made enormous fortunes as entrepreneurs can be forgiven for thinking they know a thing or two of how to run a successful business. They lose track of the differences between their business, especially if finance-related, and the performing arts organization they donate to, but maybe the performing arts organizations could better educate them in order to benefit from their fresh ideas and insights.
Some performing arts organizations today seem to want the money without the strings attached, and plop major donors into a seat at the board as "brownie point" for donating without really wanting them there. But the thing is, these people worked for the money they have. We may find their compensation unjustifiably large, but they worked for it. And hoping to get their money without giving them anything in return except a social club, aka board meetings, for them to be entertained not only is singularly short-sighted but overlooks the fundamental differences between donors today and thirty years ago, whom the New Yorker author apparently so misses.
Now, what could be done about "profits and losses" at Carnegie Hall? I'm not sure Perelman could have used that information. Major pianists or orchestras, for instance, do U.S. tours every year or every other year. What is Carnegie Hall going to say if they're too expensive - sorry, go elsewhere? They would, and it would affect the brand of Carnegie Hall as the premier classical music venue in New York City. Performing arts organizations use their money-makers to fund their losses. The goal isn't to have every performance a money-maker.
More interestingly would be to discuss how to price tickets to recoup the performer's fees and meet the institution's mission, such as introducing a wide range of patrons to classical music. Which tickets are sold first? Which performances are sold out, and how quickly do they sell out? Which price categories could support a price increase while supporting the mission of making music available to all? Which price categories might be further decreased? Are seats correctly assigned to the right category? Should more categories be created? Should time-varying pricing be implemented and reflect the increased knowledge on seat availability as the time of the performance grows near? If certain performances, or certain categories of seats at those performances, sold out months in advance (I'm thinking of Sir Simon Brattle with the Berliner Philharmoniker, for instance), I'd like to argue that at least some of the tickets could have supported a price increase and thus further contributed to the funding of Carnegie Hall's operations.
In other words, finance in performing arts extends far beyond profits and losses, but asking to see the P&L statement was taking a step in the right direction. Board of trustees members shouldn't view the executive or artistic directors as their puppets - they are not becoming decision makers simply because they provide money. On the other hand, if some performing arts organizations expect major donors to keep funding their projects without being allowed to know where their money goes, I think they are fundamentally misreading their donors base. But it also means an opportunity for performing arts organizations transparent enough to provide that information: they could soon attract a lot of money.
