The Gray Market: Why the Rooney Rule Won’t Be Enough to Diversify Museums (and Other Insights)

This week, our columnist tackles Tom Finkelpearl’s plea for diversity, how the AAP deal is working out for Sotheby’s, and that Mark Grotjahn profile.

Tom Finkelpearl at the Shed, New York, May 2017. ©Patrick McMullan. Photo Presley Ann.

Every Monday morning, artnet News brings you The Gray Market. The column decodes important stories from the previous week—and offers unparalleled insight into the inner workings of the art industry in the process. 

This week, gazing past the surface in pursuit of deeper relevance…

REWRITING THE RULE: Just over two weeks ago, New York City released its first comprehensive cultural plan—and drew plenty of applause for its overtures toward incentivizing more diverse hiring in the arts. On Monday, my colleague Brian Boucher moved past the “what” of the plan’s off-white initiative to start to address the much more difficult “how.” But one proposal in particular illustrates that even the most seemingly direct solutions usually require solutions of their own.

Case in point: In light of a study concluding that a full 74 percent of “senior staff” at NYC’s cultural organizations is Caucasian, Cultural Affairs Commissioner Tom Finkelpearl suggested that institutions should consider a fix with origins about as jarring to many in the art industry as finding your recently dead father’s wardrobe overflowing with ball gags and leather gear: the National Football League.

The so-called Rooney Rule—named in honor of Dan Rooney, chairman of the NFL’s Pittsburgh Steelers and former czar of the league’s diversity committee—seeks to promote multiculturalism in the pro-football workplace through simple means. It requires every NFL team to interview at least one minority candidate when filling a vacancy for head coach or general manager (for the uninitiated, see: lead evaluator of football personnel).

Finkelpearl reports that he applied the rule in his previous post as director of the Queens Museum, and he is far from alone in doing so within the wider economy today. Since its codification into the NFL’s bylaws in 2003, the Rooney Rule has been co-opted by a variety of corporations in a cross-section of industries. As of 2016, some variation of the rule had already been implemented by the likes of Facebook, Amazon, Intel, Xerox, and even the US Pentagon.

But while the process has almost undeniably made some positive impact on diversifying top jobs in the NFL and elsewhere, close observers also agree on something that New York’s cultural sector would do well to keep in mind when implementing its own plan: Without the proper safeguards, the Rooney Rule can be, and often is, as easily blunted by bad actors as a sharp line of dialogue.

By far the most popular and effective workaround is what Jason Reid of ESPN sub-vertical The Undefeated referred to in a 2016 piece on the Rooney Rule as “sham interviews.” All an insincere employer has to do is to bring in a minority candidate for a token chat, certify that they’ve done their mandated due diligence on diversity, and then immediately hire whichever Jon Snow they intended to hire from the beginning—sometimes, in particularly egregious cases, with barely more than a few hours elapsing between rule compliance and the announcement that the answer was (yet again) pale as hell.

As Reid points out, in the 2012 NFL offseason alone, “eight head coaches and seven general managers were fired; 15 white guys were hired” in their place, despite the Rooney Rule’s presence. Not exactly a ratio that moved the ball forward on diversity.

In fact, even this summary undersells the degree of malpractice. As I can attest from following the NFL in my teens and twenties—before ever-mounting medical evidence all but cemented American football as a slow form of suicide—the Rooney Rule often hasn’t even resulted in a broad range of DIFFERENT minority candidates being interviewed. Instead, entire hiring cycles sometimes go by in which practically every team with a headline job to fill simply passes around the same one or two candidates of color like a poorly rolled joint in a university dorm room.

None of this is to say that the Rooney Rule would be ineffective in diversifying New York’s art industry, or the art industry overall. However, it suggests that more work needs to be done to make the practice as effective as it can be.

For instance, as Reid points out, some have advocated that NFL ownership groups should be required to release interview transcripts to the league office and affiliated organizations for review, as a means to head off sham interviews. A gender-based variation of the rule would also be a worthwhile addition to the landscape. (To its credit, the NFL now mandates that at least one woman must be interviewed “for all executive openings in the commissioner’s office,” per Reid, and at least one team—the San Francisco 49ers—has followed suit in its own corporate structure.)

Still, Finkelpearl’s invocation of the Rooney Rule seems to prove that his heart and mind are in the right place. Here’s hoping that, if the concept indeed becomes a plank in NYC’s cultural plan, he and his associates also team their good intentions with a sober awareness of how the rule has been abused elsewhere. [artnet News]

Sotheby’s postwar and contemporary evening sale, held in New York in May. Courtesy Sotheby’s.

TARGET ACQUISITION MODE: On Thursday, Sotheby’s reported its second-quarter financial results, which CEO Tad Smith inspiringly labeled “solid.” In fairness to Smith, my colleague Colin Gleadell’s breakdown shows that there were enough counterbalancing data points to give the house’s story either a positive or negative slant. But one set of metrics suggests that, despite the financial markets’ lack of enthusiasm for the most recent numbers, Sotheby’s has wildly outperformed its own expectations in key areas recently.

For a taste of the macro picture, Sotheby’s overall sales revenue at auction dropped two percent, to about $2.41 billion, in comparison to the second quarter of 2016… but its private sales ascended 34 percent, to about $334 million, against that same period. So, one down, one up.

Similarly, the house’s sales of inventory jumped from $12 million to $91 million—an increase of 760 percent. But when you consider that “inventory” largely means “lots acquired by Sotheby’s by default after they failed to find a buyer at the house-guaranteed price at auction,” it’s debatable whether that data point is cause for pride or, alternatively, the same kind of dubious honor as, say, being recognized as the most prolific license-plate maker in a federal prison.

Let’s switch to the micro view, then, specifically as it concerns Sotheby’s most headline-grabbing move in recent memory. Page 36 of the house’s Form 10-Q filing includes, for the first time I’ve seen, verified financials around the house’s January 2016 acquisition of Art Agency, Partners—and with those verified financials, some concept of the deal’s actual strategic value.

As a refresher, the Sotheby’s-AAP deal was reportedly sealed for $50 million, plus the possibility of an additional $35 million in incentives if AAP’s principals helped their new employer reach a variety of undisclosed performance benchmarks over the succeeding five years.

Amy Cappellazzo, ©Patrick McMullan. Photo Sean Zanni/PMC.

What the house’s latest 10-Q reveals is that Amy Cappellazzo, Allan Schwartzman, and Adam Chinn haven’t just blown past those benchmarks like frat pledges up against the legal alcohol limit during initiation night. It reveals that they managed to do so by the end of year one.

If finance language gets your dopamine receptors lit, here’s the relevant excerpt:

For the year ended December 31, 2016, [Sotheby’s] recognized $35 million of compensation expense associated with the AAP earn-out arrangement, reflecting the full achievement of [AAP’s cumulative financial] Target as a result of our improved market share in the Contemporary Art collecting category, as well as an improvement in auction commission margins, during the initial annual period. The $35 million owed under the earn-out arrangement is being paid in four annual increments of $8.75 million in the first quarter of each year beginning in 2017 and through 2020.

Now, we still don’t know what the actual target figures in these categories were. Nor did Sotheby’s unveil “the amount of revenues and earnings contributed to the Agency segment”—presumably, its advisory department—by the AAP acquisition over that period, let alone to date.

But whatever the specific benchmarks were, Sotheby’s surpassed them much faster than the deal’s in-house architects probably anticipated. And whether this means AAP has really been THAT good for business, or just that the house agreed to targets THAT much lower than was prudent, AAP’s $35 million first-year earn-out suggests just how badly Sotheby’s needed more market expertise back when the deal was closed. [artnet News]

Mark Grotjahn. Photo Stefanie Keenan/Getty Images for Blum & Poe.

Mark Grotjahn. Photo Stefanie Keenan/Getty Images for Blum & Poe.

AN INCONVENIENT SEQUEL: Finally this week, a quick word about the art-media story that launched a thousand hot takes in the past seven days: Robin Pogrebin’s profile on Mark Grotjahn—or, more accurately, on his influence over his own market, with next to nothing said about the creative side of his enterprise.

A day after the story ran, Jerry Saltz rightly pointed out (among other criticisms) that most of Pogrebin’s gushing sources had a vested financial interest in portraying Grotjahn as the second coming. A few days after that, Marion Maneker of Art Market Monitor rightly pointed out in his email newsletter that it’s not really fair to criticize a deliberately market-based story for refusing to dial in on the creative side of the equation. And around and around many of us went again…

What I want to discuss, though, is the quote that everyone on all sides of the issue seemed as eager to hold up high as a parent whose ice cream cone is under threat from an over-sugared toddler: “While some artists have caught fire and then flamed out, art experts say Mr. Grotjahn is likely to endure because his talent is real and significant.”

Long story short, I think this statement may be true… but not necessarily because of the type of “talent” that these unnamed art experts mean. Which is exactly makes it crucial to this discussion, in my eyes.

As Stephen King once said, talent—or more specifically, creative talent—is cheaper than table salt. No one wants to hear this about the art industry, but it’s the truth. Succeeding in the business of making work almost invariably requires an entirely different skill set, or at least a fortuitous partnership that can supply it from outside.

From managing your production and supply to weaving a compelling narrative about your practice to networking hard enough to become “the consummate insider in the Los Angeles art world,” as Pogrebin defines Grotjahn at one point—all of these are expressions of talent, too. It’s just ENTREPRENEURIAL talent rather than aesthetic talent.

Although there are undoubtedly exceptions, creating and maintaining notoriety normally requires an artist to have both of these proficiencies. Yes, the work has to be great—or at least, good enough. But the person making it also has to be great—or at least, willing to listen to someone else great—at working the unique social and financial ecosystem that is the art industry. It’s about combining aesthetics, economics, and ego-management into a single irresistible medley.

As evidenced by the visibility and marketability of several artists with far less creative legitimacy than Grotjahn, the latter brand of talent often plays a larger role in determining financial success in the arts than the former. Remember: This is not a meritocracy. And for better or worse, what Pogrebin’s profile—and the reaction to it—should remind us is that we can’t get a holistic view of any artist’s life in 2017 without considering the alchemy of the market right alongside the alchemy of the studio. [The New York Times]

That’s all for this edition. Til next time, remember: Seeing more doesn’t necessarily mean you’ll like what comes into focus.

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