They Told Me Not to Take that Job: Tumult, Betrayal, Heroics, and the Transformation of Lincoln Center (34 page)
Authors: Reynold Levy
These Met concessions beg two important questions.
First, the Met claims that roughly 60 percent of its $327 million budget is paid to its unionized workforce, or $196 million. That leaves $131 million. Of that amount, the Met has now agreed to cut $11.25 million in expenses, or 8.5 percent of the balance. If the Met can accomplish this significant a cost reduction in a single twelve-month period, why did it not do so in the first seven years of Gelb’s tenure? Instead, expenses went only one way. Up. Way up. Couldn’t the organization have avoided bringing itself, by its own admission, to the razor’s edge of bankruptcy? And where were the checks and balances that are supposed to be provided by the scrutiny and oversight of the board of directors during these years of cost escalation?
Second, precisely what role is Keilin to play? The Met Opera has as part of its board structure a finance committee, an executive committee,
and an audit committee. Its books are audited annually by the accounting firm KPMG. Both S&P and Moody’s closely monitor the Met’s finances as part of their oversight of its $100 million bond issue.
Apparently these multiple sources of review are insufficient for the unions. Their level of trust in management has sunk so low that they feel a truly independent watchdog is needed. An inkling of what has motivated the unions was disclosed to the
New York Times
on August 19, 2014, by Jessica Phillips Rieske, a member of the orchestra committee. Rieske told journalist Michael Cooper that she found it gratifying that federal mediators and Keilin had
agreed with our assessment that in addition to our agreeing to wage reductions, Met management needed to look at its own budget, introduce important efficiencies and curtail unlimited spending.
Now, in the contract itself, there are mechanisms in place to address management’s cost inefficiencies and provide greater financial oversight as we all move forward.
Such an arrangement is highly unusual. It is difficult to find a management-labor agreement in the nonprofit sector that is conditioned on the presence of a third-party monitor. Keilin’s role is to validate and authenticate management’s collectively bargained commitments. For the unions to have spent finite collective bargaining capital on this kind of management concession must mean that there really is no love lost and little trust remaining between the union and Met management, together with its board of directors.
Such acrimony is not a pretty sight. But Keilin is a top-flight professional who will conduct himself fairly, competently, and by the book.
What a paradox. The unions, whose members are accused of excessive and unaffordable pay, fringe benefits, and work rules, publicly argue that it is management that needs economic discipline. If there is to be a sound Met economic future, employee “give backs” must be matched by the Met’s own self-control and self-restraint in spending.
Could it be that with Keilin’s help the unions studied the Met’s finances more carefully than ever, and what they saw was a future that resembled nothing more than that of the New York City Opera?
Is it possible that this agreement and Keilin’s continued presence will bring to the Met’s financial management a large dose of the discipline that Peter Gelb and the board of directors had not demonstrated on their own?
This much seems clear. If Gelb had hoped that the union settlement would go a long way toward easing the Met’s financial woes, he must have been keenly disappointed with the outcome. In an operation of the Met’s size and complexity, there is no single answer to the economic challenges before it. The end result of the negotiations was a step in the right direction. Many other measures and acts of self-restraint will be necessary for this artistic patient to fully recover.
Let us assume that Gelb builds on the unionized labor concessions and pares expenses under his own control, as he is now contractually bound to do. Let us assume that in all other respects he manages the opera’s operations much more tightly. Let us also assume that major stumbling blocks like the financial and artistic setback of the commissioned
Ring Cycle
do not recur. If administrative expenses are streamlined, if the number of new operas and newly commissioned productions is even modestly reduced, and if coproductions are just slightly increased, so much the better.
Were all of this to come about, it is claimed that the Met Opera would save $90 million in expenses over the four-year contract. Impressive. But consider that the $90 million is only roughly 7.5 percent of the $1.3 billion the Met is expected to spend at an annual rate of $320 million per year over the next four years. As a result, the Met Opera will need many more generous trustees and benefactors. It requires a much larger endowment, ideally three to four times the size of its operating budget.
The stated willingness of the board of directors to endeavor to double the size of the Met Opera’s endowment over the next four to five years is important and helpful, but it is just a beginning. When the endowment reaches that $520 million total, a 5 percent drawdown from it will yield $25 million, or about 7 percent of its current $330 million operating budget. Reaching a $520 million endowment is a good beginning. But that’s all.
The Met also needs to buttress the value of its pension funds. And it must set aside resources for its maintenance and repair needs. They
cannot be deferred much longer. Only surplus capital generated by a multiyear, extremely ambitious, and successful fund-raising drive will allow for significant progress toward each of these ends.
Writing in the
Wall Street Journal
of August 29, 2014, Terry Teachout surmised that either Gelb exaggerated the Met Opera’s financial plight, or the union “ate his lunch.” These alternatives are not mutually exclusive, of course. More telling is Teachout’s warning, proclaimed with the New York City Opera’s recent demise fresh in mind: “Given sufficiently bad management, no arts organization is too big, too old or too famous to fail. Not even the Metropolitan Opera.” Teachout’s article is titled “Apocalypse Later.” The two-word sentence does not end with a question mark.
Sure enough, on November 20, 2014, the Met Opera revealed that its operating deficit for the completed 2013–2014 season came in at an astounding $22 million. As a percentage of its budget, nothing of this magnitude had been experienced for three decades, going back to 1984. In absolute terms, this loss was among the largest ever experienced by the Met Opera. Even more dangerous, that $22 million deficit in one stroke reduced by 8 percent its $265 million endowment as it was valued at the end of July 2014.
It is no wonder that Gelb had spoken about the Met Opera’s finances in such grave terms as collective bargaining approached. In FY 2013–2014, charitable contributions had fallen. Earned income in the form of ticket revenue was well short of expectations. Expenses, though modestly lower than in the prior year, were still in an elevated state of $316 million. Overall, during Gelb’s tenure the Met’s endowment has badly eroded.
For the Met Opera, the growing gap between its annual costs and revenues had reached crisis proportions, as had the Met’s net asset position.
Clearly 2014 was the Metropolitan Opera’s year of reckoning, its moment of truth. It will take at least a decade of extremely hard work to deal with its problematic financial condition and bring it to a reasonably healthy state. And it will take mature leadership to act on the realities revealed by this dramatic and important episode in the life of the Met. Little would please me more than to conclude that Teachout’s foreboding proved to be a useful expression of alarm, rather than an accurate prophecy.
I
N VIRTUALLY EVERY
country in the world where they exist, the performing arts, including opera, receive large government subsidies. Considered national treasures, support comes to them regularly and more or less reliably. Not so in America. If we wish to keep government small(er) and taxes low(er), then especially those who benefit most from such policies should offer generous philanthropic support.
Whether contributed income can be maintained and increased at needed levels is an open and critical question. At least some of the answer resides in how energetic, compelling, and persuasive are those who solicit on behalf of noble organizations and causes. The difference between a successful “call to alms” and a “farewell to alms” is often in the artistic and financial performance of the organization asking and in the sense of urgency with which it does so. It would help the Met a great deal if mutual trust between management and its employees were to be restored over time and if this period of bad feeling were to subside.
I hope that as long as Peter Gelb continues to play his extraordinarily important role as the general manager of the Metropolitan Opera, he will arrogate to himself fewer important decisions and delegate more to others. This recommendation comes out of respect for the extraordinary demands placed on him. It recognizes that no single human being can assume and discharge as much responsibility as he has done. The Metropolitan Opera requires a strong team of executive leaders working in tandem if it is to see its way through what will be an extremely challenging decade. Building that team could well be one of Gelb’s most important accomplishments.
An identical challenge faces the Met Opera’s board of directors. Is it properly sized and composed for the tough years ahead? Doesn’t it need many more fresh, enthusiastic, well-heeled, and generous recruits? I suspect that the Met board’s leadership also has their work cut out for them.
The Metropolitan Opera is a marvelous and indispensable organization, possessed of a very distinguished history. It now raises the remarkable sum of $160 million annually. Until and unless the Met’s economic model radically changes, its board and staff will need to do even better, as it first restores and then expands the value of its
endowment. Doing so will require broadening its appeal and increasing the number of its most munificent benefactors.
For the sake of preserving grand opera as an art form in our country, I earnestly hope those blessed with an abundance of wealth, not least the members of the board of the Met, will answer the call. They are out there, waiting to be asked. New York is the wealthiest city in the richest country in the world. If orders of magnitude of more funds for opera can be found anywhere, it is here, in the Met’s hometown and among lovers of the art form throughout the nation and even beyond it.
I am rooting for Gelb and his trustee colleagues to successfully lead the way.
Whether a man is burdened by power or enjoys power; whether he is trapped by responsibility or made free by it; whether he is moved by other people and outer forces or moves them—this is the essence of leadership.
—THEODORE H. WHITE,
The Making of the President
, 1960
T
he talent, character, and drive of those holding high office matter a great deal. The health of an enterprise depends in no small measure on the qualities of mind and the management acumen of its leadership.
Where does that leadership come from?
For me, a vital source of inspiration and emulation has been observing carefully the lives of others, whether by reading about exceptional people or seeing them depicted across the footlights of a stage or on a screen at home or in a darkened movie theater.
I have also been fortunate in coming to know personally some leaders whose influence on me has been profound. It is my privilege to introduce you to a few of them. Some of my depictions portray public figures, revealing features of character or accomplishment that are either not well known or are underappreciated. Others delineate personalities who are hardly household names.
These individuals share three traits. They work very hard to achieve uncommon results. They wish to make of this world a better place. They offer time, treasure, and talent to advance the public good.
By examining their lives closely, I have grown personally and at the workplace. How others assess situations, unearth opportunities, respond to threats, and conduct themselves more generally has always been an essential wellspring of learning for me. My career has been immensely enriched by dozens of such associations, models to closely watch, lively examples of how to inhabit a life of consequence.
B
EVERLY
S
ILLS WAS SINGULAR
. A global superstar on the world’s opera stages, she retired at fifty years of age, never to sing again. Not even in the shower, she claimed.