Indecent Exposure (73 page)
- *
The "remedial steps" to which Allen referred were Irwin Kram
er's recommendations after the Bege
lman investigation that Lou Phillips, the West Coast controller, and Jim Johnson, the studio's vice president for administration, be removed from
their jobs. The weekend aft
er the board meeting of Thursday. July
22
.
1978. Lou Phillips was fired by order of Hirschf
ield and Fischer. While no one accused Philli
ps of complicity in any of the embezlements. it was fell that he could
have been more vi
gilant in monitoring Audrey Lisn
er. Jim Johnson remained in place, having had no respon
sibility for supervising Lisner,
even indirectly. - reputation and repair operating deficiencies, I move that we immediately engage an independent management expert to report to the board so that the board may recommend . . . immediate policy to correct our course. The charge to the management expert is to review all procedures and operations of Columbia Pictures, both structural and operational, and to report the findings to the board as soon as possible. Present management shall be directed to cooperate completely with the board in order to facilitate this study.
..." - James Wilmot, whose attendance at board meetings was erratic, said, "The resolution is on the table. Let's vote on it."
- "Wait a minute," said
Hirschfield
. "The last time I checked the rules under which the company operates, we have an opportunity to discuss resolutions before we vote on them." - "If you've got something to say, say it in a hurry," Wilmot retorted.
- "I view that remark as insulting, and as uncalled for as this resolution," Hirschfield said. "This resolution is a fancy version of the accusation that the company is out of control, which has been floating around for the past several weeks. The company is
not
out of control and the claim that it is is an absolutely untrue and unwarranted attack on the management of the company. We are regarded in the industry as one of the best managed and best controlled companies. I'd like to know from the board just one instance where the company is out of control." - Irwin Kramer said, "Audrey Lisner stole thr
ee hundred thousand dollars. Are
you in control of that? David
Begelman
stole all that money repeatedly over a period of years. Were you in control of that?" - "Price Wate
rhouse has fully analyzed our controls,"
Hirschfield
said, "and found that the controls in place were not materially deficient, and that the problem was a human failure to follow established procedures. Nevertheless, we have tightened the procedures. This board knows full well that I have never been opposed to the strengthening of controls. When I came to the company, controls and systems and procedures were virtually non
-
existent, but the board knows that I brought in outside experts and there have been a lot of improvements. So this "out of control' business is nonsense. Who would conduct such a study if it were conducted?" - "That's a separate issue and has nothing to do with the basic issue of having a review of operations," Allen said.
- "We have a right to know who would conduct the review."
- "We'll get to that as soon as we've voted on this resolution," Herbert said. "Let's vote."
- Everyone voted for the study except
Hirschfield
, who abstained. - Herbert Allen then moved that the review of controls be conducted by Robert Stone.
- Hirschfield was enraged. "As far as I'm concerned, the board has now thrown down the gauntlet! This is a deliberate effort to inflame an already difficult situation! To pick someone to conduct a study who has just been turned down by management for a job with the company is like asking the fox to go out and investigate why the chickens, in the board's judgment, aren't performing adequately. He'll obviously inflame everyone in the company. No one wants anything to do with him. This is infantile behavior. It smacks of being a punitive kind of investigation, rather than an investigation to get the facts. If you want the facts, our auditors are available. They've already reported. If you want them to do another study, fine. If you
want to bring in McKinse
y, or Arthur D. Little, fine. But to bring in Bob Stone is nothing more than an effort to harass the management of the company, and me in particular, and I find it outrageous." - Herbert Allen defended Stone as fully qualified to conduct the study, and then asked for a vote. Everyone voted for Stone except Hirschfi
eld, who voted no, and Leo Jaffe
, who abstained. - The meeting was adjourned.
- Hirschfield
, Fischer, and Adler were demoralized. Fischer expected
Hirschfield
to be fired within days or, at most, weeks. But he had seen so many dramatic shifts in the company's course that he knew nothing could be counted upon. "If you tried to explain to an outsider what is going on in this company," Fischer said, "you couldn't do it and have it make any sense. They wouldn't believe it. It makes no sense." - The board had authorized the negotiation of a new contract for
Hirschfield
as the chief executive officer, thus implying approval of his performance. Then the board had contradicted that implication by declaring Hirschfield's control of the company deficient and commissioning a review of that control by the man whom Hirschfield had rejected for a management post and who had become the symbol of Herbert Allen's furious determination to impose his will on
Hirschfield
. The illogic and cynicism seemed blatant but not surprising, in Hirschfield's view. Logic, rationality, and sincerity had not been present in the Columbia board room for months. Why should they play any part on June 22? - Adle
r, nevertheless, thought it important that the moment not go unrecorded. He wrote a memorandum for his file and sent a copy to Hirschfield: - The sudden shift in attitude resulting in the desire to immediately negotiate with Alan
Hirschfield
seems suspicious to me. There has certainly been no general goodwill expressed toward him and lots of negative comments on both a personal and business level. My feeling is that they feel that he is in an awkward position at this time due to the Audrey Lisner matter (which cannot really be specifically blamed on him in any way). . . . Chances
are
that there will be a disagreement over certain items of Hirschfield's contract regarding his authority and under what conditions they can dismiss him. My feeling is that they will clearly seek to erode his position and then say they were unable to reach agreement with him. - As for the prospective review of the company's controls, Adler wrote that it would serve "no real purpose other than to harass present management and to support the uninformed and outrageous claims of [those] who presently control the board."
- Herbert Allen and Matty Rosenhaus had recruited Bob Stone for the control study a day or two before the board meeting. Herbert's basic pitch to Stone was: "If you do the study, it will give you an insight into the company. It will give you an opportunity to meet people. It will give you a familiarity with the business. And should something work out on a permanent basis, it will certainly give you a great leg up in getting into the job in an operating capacity."
- On Friday, Hirschfield and Adler had the first of several private co
nferences with Sidney Silberman,
the lawyer who would manage Hirschfield's proxy fight if
Hirschfield
chose to launch it. Silberman stressed the difficulties of waging a proxy contest: Secrecy is essential but difficult to maintain. Before announcing his intentions, the potential aggressor must quietly recruit an alternative board of directors, test the sentiment of a cross-section of stockholders, and line up as much financial support as possible, all without having the enemy learn his secret. The more people aware of the aggressor's plan, the greater the risk of compromise. Silberman also informed Hirschfield and Adler that the costs of waging a proxy battle, including the legal fees, full-page newspaper advertisements and other expenses, could range from half a million to a million dollars, particularly if the antagonists become embroiled in litigation, which often happens. - Although he had not yet made up his mind, Hirschfield said he saw no obstacles that were inherently insurmountable. He was willing to bear the expense himself and felt he would have widespread support among Columbia stockholders and other people who controlled large amounts of money—Richard Smith, the chief executive of General Cinema, for one.
- Sid Silberman pointed out that the
Allens
wielded considerable influence in Wall Street and, in the event of a fight, could be expected to call in whatever chits they might have outstanding. - Later in the day Hirschfield met with Todd Lang, who had been unable to attend the Thursday board meeting but was deeply worried by what he had heard and by recent developments in general.
- "The only way this is going to be resolved," Lang said, "is for you and Herbert to talk it out." (Lang, who knew nothing of Hirschfield's plans for a proxy fight, had said the same thing to Herbert Allen.)
- "Those conversations always turn out to be one-way conversations," Hirschfield replied.
"I
talk and rant and rave and Herbert just sits there staring at me. And then he says 'It'll all work out' or my real problem is with Matty and Irwin, or something equally evasive." - "You've got to do something to try to break through that, because only you two can settle it. It's worth one more try."
- "I'll attempt to do something when I get back from Chicago."
- FIFTY-SEVEN
- The Chicago meeting exemplified Alan Hirschfield's fondness for assembling groups of people to promote camaraderie in the corporation. Apart from the substantive necessity of quarterly budget reviews, which he conducted with the top executives of each company individually, he felt it was beneficial occasionally to convene all the executives and have each company make a presentation to the group. In that way, Hirschfield believed, each executive would know what was going on in other parts of the corporation: The motion-picture people would appreciate the
problems of the pinball-machine
people, the television-programming people would better understand the television-commercial makers, and so forth. Even though the business presentations generally turned out to be tedious, the overall idea worked. As Norman Horowitz of Columbia Pictures Television had put it, "You go through the numbers and nobody gives a shit. But the real purpose is to be together and go away joyously, and that we do." The food always was excellent, the drinks abundant, the tennis games intense, the poker games boisterous, and the cigar smoke thick. There also were screenings of the latest Columbia films and appearances by Arista artists. - The first problem at the 1978 meeting—as the participants began arriving in Chicago on the rainy evening of Sunday, June 25—was the hotel.
Hirschfield
had intended to hold the event at the Hyatt Regency O'Hare, which he knew from experience had excellent facilities. When he gave instructions to his assistant weeks earlier, however, he confused the Hyatt
Regency with the Marriott O'Hare
, a less illustrious hotel. Because of the size of the group it was too late that Sunday evening to change hotels without notice. And since the Columbia executives were acc
ustomed to only the best accom
modations. they ribbed Hirschfield mercilessly for the next two days. - As it turned out,
the facilities were the only source of humor at the meeting, which should have been canceled. None of the business presentations, none of the cocktail parties, not even the poker games, all of which proceeded as planned, could compete for the attention of the participants with the corporate management crisis. No one could concentrate on anything but the plight of Alan
Hirschfield
. - Hirschfield. Fischer, and Adler. sometimes joined by one or two others, spent much of their time huddled in the hallway outside the main conference room discussing what to do next in New York. The other executives held impromptu meetings of various sizes proclaiming their support for Hirschfield but uncertain how to marshal it.
- Despite many interruptions, the conference proceeded on schedule through Monday night. Late Tuesday morning, however, there was a rash of telephone calls from New York and Los Angeles.
Variety's
Art Murphy had published an article disclosing the Columbia board's intention to have Robert Stone review internal financial controls. And Jack Egan had written in 77ie
Washington Post
that Hirschfield's job might be in jeopardy. "Among a litany of charges board
members privately are hurling
at Hirschfield," Egan wrote, "are that 'he has difficulty making decisions.' 'he tends to blame others when something goes wrong," 'it is tough for him to have strong people around him,' and he does not really deserve much credit for Columbia's financial turnaround in the last five years."
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