CHANGES IN BREEDERS’ CUP ELECTION PROCEDURES
By Ray Paulick
Somewhere in between the old way the Breeders’ Cup was governed and the new method of selecting board members may be the right way.
For most of its history, a small group of industry insiders who served on an “executive committee” directed the Breeders’ Cup. There was little to no turnover of this group over 20 years, little to no accountability or transparency in the way things were run. And there was little to no creativity or innovation for the championship event that was held for the first time in 1984.
Five years ago, under pressure from several significant industry stakeholders, the Breeders’ Cup altered how it was governed by giving breeders who nominated foals and/or stallions an opportunity to vote in annual elections for positions on a newly formed board of members and trustees. Each year, 13 members are elected to fill three-year terms on that board. Those 39 individuals (3×13), along with six founding members of the Breeders’ Cup, and three past and current presidents (all comprising the outer board), then vote once a year to fill seats on the operating board of directors (the inner board). These latter directors serve two-year terms, with six seats up for election one year and seven the next. They are the men and women who make the major decisions regarding the Breeders’ Cup.
What this means is that you conceivably could have 100% turnover on the Breeders’ Cup inner board every two years. That is too frequent for a business of this nature, in my opinion. There is a learning curve for many board members that may prevent some of them from being fully engaged or productive for at least the first year. With the possibility of frequent turnover of board members, it becomes extremely challenging for management to draft and implement five-year or 10-year strategic plans. I’ve seen far too many industry organizations change directions or priorities for no good reason whenever there is significant turnover at the board level, and in particular with the chairman. Too many chairmen bring in their own agendas and ideas and reverse course from what the previous board or chairman did. Too many top executives spend too much time and effort handicapping the field of potential board members and future chairmen, and then massaging the egos of those individuals to protect their own jobs.
I am not calling for a return to the days of an executive committee or a chairman for life, but perhaps there is a happy medium. For starters, why not make the terms on the inner board of directors the same three years they are on the outer board?
We are now on the eve of the 2010 election, with 28 individuals (10 of them incumbents) seeking 13 spots on the outer board. When the new board of members and trustees is seated on July 16, a second election will be held with that group determining who will fill seven positions on the inner board of directors.
STALLION VOTES MAY BE SPLIT
There is a significant change in this year’s election for the board of members and trustees. For the first time, stallion shareholders may be able to vote their percentage of ownership in a stallion—the operative word being “may.” And since the stallion farms control so many of the 31,248 votes, this change could be influential to the outcome.
The change to allow split voting by stallion syndicates came about after critical comments last year from a number of breeders, including Peter Blum and Satish Sanan. Sanan, a member of the board of directors who is up for re-election this year, made a convincing argument that splitting the votes was the right thing to do and could be easily accomplished through online technology. Management was directed to alter the voting procedures for the 2010 election.
The new procedures, which take effect when voting begins tomorrow, allow stallion syndicate managers to assign “proxy” votes assigned to a specific stallion, if the syndicate chooses to do so. There is no requirement by Breeders’ Cup that stallion syndicates allow individual shareholders in a stallion to vote the percentage they own in a stallion. For example, if a specific stallion receives 60 votes (based on a formula involving stud fee and the number of foals produced by that stallion, and a shareholder owned one-fourth of the outstanding shares, he would receive 15 votes if the syndicate agreed to split the stallion’s vote.
This procedural change also allows foal nominators to assign a proxy for their votes.
Instructions on how this will be done were sent to stallion syndicate managers and to all nominators last week. The procedure will be similar to how shareholders in a publicly traded company may assign a proxy for their votes.
The change was not broadcast in a press release, a curious move since Breeders’ Cup chairman Bill Farish and president Greg Avioli have been criticized in the past for not being as open and transparent as some would like. A number of breeders complained recently to the Paulick Report that they were unaware of the change that allows stallion syndicates and foal nominators to name a proxy for their votes.
To be fair, however, Breeders’ Cup officials did mention the adoption of proxy voting in a letter sent to all nominators in April, and again in two emails sent to nominators in May. Then in a series of letters and emails in May and early June, Breeders’ Cup went into more detail on exactly how the split voting would work.
Perhaps no one reads their mail or emails.
Finally, the Breeders’ Cup election website, features a list of all eligible voters with the number of votes to which they are entitled, biographies of the 28 candidates, and information on the outside company, Votenet, that is facilitating the election. The election website also has very specific information on how to split votes. Click here to access the site.
The one thing Breeders’ Cup is not doing is telling syndicate managers they must split stallion votes if requested by a shareholder. “It’s not the place of the Breeders’ Cup to get between a syndicate and shareholders,” said attorney Bob Watt, who is corporate secretary for the Breeders’ Cup.
This is a positive move by the Breeders’ Cup board and management team. Shareholders invest large sums of money in stallions and deserve the right to their own personal vote.
There is another significant investor who also might warrant the opportunity to vote in Breeders’ Cup elections: horse owners who support the program through pre-entry and entry fees. An owner of a starter in the Breeders’ Cup Classic, for example, pays $50,000 to pre-enter and another $100,000 to start. It seems only fair that these stakeholders who have a great deal of interest in the success and future direction of the Breeders’ Cup be allowed to have a say in how it is run.
As has been the case in recent years, there are slates of candidates being proposed by two different camps loosely defined as “new guard” vs. “old guard.” Lots of politicking and vote trading is going on before voting begins Tuesday morning. The election runs through June 22 at 5 p.m.
I’ll offer my thoughts on the candidates in this space tomorrow.
Copyright © 2010, Ray Paulick
Savvy businesses recognize value. Advertise in the Paulick Report.
Sign up for our Email Flashes to get the latest news, analysis and commentary from Ray Paulick
Tags: Bill Farish, Board of Directors, bob watt, Breeders' Cup, Greg Avioli, Ray Paulick, satish sanan
June 7th, 2010 at 12:17 pm
Jerry Jamgotchian should be on the board.
June 7th, 2010 at 1:14 pm
I’m not sure of the best way for the votes to be assigned for the Board of Directors. But those who have been put in charge seem to be out of touch with the breeders, the fans and good marketing sense as well. In my opinion, there have been very poor decisions (and proposals) made by those in charge of the Breeders Cup in the last few years. These poor decisions have watered down the Breeders Cup and made it much less special. They include:
> Expanding it to two days (Friday and Saturday)
> Running the filly races on Friday and the colts on Saturday
> Expanding the two-year old championship races to include turf
> Calling the races the World Championships (they are U.S championships with a few foreign horses thrown in)
> Win and you’re in; one race should not decide who gets to run
> Signing a contract to give ESPN the television rights to the Breeders Cup; ESPN clearly thinks of horse racing as low priority and has done virtually nothing to promote the Breeders Cup
> Proposal to drop the supplemental stakes program (not done because of the massive protests)
> Proposal to assign a permanent site for the Breeders Cup (still up in the air?)
The one thing that has been done that I like (and many will disagree) is the addition of the Breeders Cup Marathon. Anything to encourage breeding for stamina and distance-racing is a plus in my opinion. The quality of the Marathon has been low so far, but that is because most of our horses are basically sprinters right now.
June 7th, 2010 at 2:18 pm
Andrew A:
Why?
June 7th, 2010 at 2:25 pm
The election process may be improved but too bad the elected wont
June 7th, 2010 at 2:28 pm
Margrethe check this out and then tell me what you don’t like about his plan.
http://www.voteforjerryjam.com/businessplan.html
It looks like a winner to me.
June 7th, 2010 at 3:16 pm
The Board of Directors need to make a number of changes to Governance and the voting process including I propose the following changes:
1)Hold the Elections every 2 years rather than annually;
2)Make the terms of the two boards coterminous;
3)The Chairman should be elected by the “Big Board” and not the small board and for a term of 3 years;
4)Provide an internet based program to the Syndicate managers that they can down load to facilitate the “Split Voting” process for their shareholders. Share holders who pay for the stallion shares must be able to vote their shares by logging on to a farm syndicate program. It should not be left up to discretion of the syndicate/farm managers to decide on this crucial voting process as stallion nominations carry a large number of votes and very few farms (with the exception of a few), if any, own the majority of the stallion shares;
5)Proxy should not be allowed for the foal nomination process as it creates a perception of possible election fraud;
6)Reduce the voting time period to 3 days for the Trustees Elections
We should either behave like a public company (which I prefer) in all our functions including, publishing financials, management compensation, regular nominator communications and much more or a tightly managed, opaque organization and not just when it suits us like the Proxy process which was never approved by the Board. We need to make some fundamental changes to our governance, management processes and communications to nominators at large if we are going to earn their trust and respect.
June 7th, 2010 at 3:21 pm
Jerry Jam’s platform is the equivalent of cut taxes, increase spending, make everything better. Very well thought out…
June 7th, 2010 at 4:07 pm
and JJ’s plan puts the BC out of business…#epicfail
June 7th, 2010 at 4:11 pm
Hey Norm, what are who are the other people running and where are their plans?
JJ put his plan out there for everyone to see and anyone willing to step up like that is a welcome addition as far as I’m concerned.
Where’s the other plans Norm?
June 7th, 2010 at 4:17 pm
I like JJ because he tells it like it is and isnt afraid to stand up against the abuses by those in power, whether racing boards or stewards. If he is elected, it might be the best thing that as happened to the BC
June 7th, 2010 at 7:08 pm
“We should either behave like a public company (which I prefer) in all our functions including, publishing financials, management compensation, regular nominator communications and much more or a tightly managed, opaque organization and not just when it suits us like the Proxy process which was never approved by the Board. We need to make some fundamental changes to our governance, management processes and communications to nominators at large if we are going to earn their trust and respect.”
As usual Satish makes several good suggestions but, hopefully without raising his ire, can I point out that that he is reaching at best or being misleading at worst with the above suggestion in light of the facts that Breeders’ Cup has become more accountable to its “shareholders”, does publish financials, including management comp, and communicates to nominators on a regular basis.
On the topic of behaving more like a public company (which Breeders’ Cup clearly is not but proposing that it act like one also clearly benefits his arguments): How many effective public companies are there that have board members who discuss closely-held company negotiations on satellite radio programs, post their suggestions for corporate governance on industry blogs and regularly leak board discussions to the media to forward their own agendas?
Just asking…
I may be mistaken but I thought one of Satish’s (and others’) objections to Churchill Downs’ management is that it behaves very much like the public company that it is, perhaps putting the long term interests of racing behind the short-term pressure to perform quarterly for analysts and shareholders who are not in for the long haul. The public companies in racing seem to be the ones most focused on gaming and least focused on facing racing’s many challenges. Is public company management style really what the Breeders’ Cup needs right now?
I’d prefer vested industry stakeholders taking a long view of the future. To Satish’s credit, it appears that he has brought energy, strategic thinking, discipline and focus to the Breeders’ Cup board. He seems to have a hard time with not getting everything his own way.
June 7th, 2010 at 7:29 pm
Sanan is exactly right– the Breeders’ Cup is not the sole property of the folks who get elected to and control the inner board. After all these years, there is still no accountability to the industry at large. Never has been. There exists the illusion of transparency and accountability, but at the end of the day, when you peel the paint off, there ain’t much, if any. The Breeders’ Cup is no different than Coca-Cola. If you own one share, Coke has to tell you what the hell is going on, and the shareholder has the right to know. The shareholders of the Breeder’s Cup are the people who contribute the revenue. That means if you pay to nominate one foal, the Breeders’ Cup must be accountable to you, like it or not. It’s the industry’s organization. The sooner the Breeders’ Cup accepts this fact the better– for everyone.
June 7th, 2010 at 7:50 pm
Can any of you Movers and Shakers tell me why there isn’t a Horseplayer on the board?
June 7th, 2010 at 7:54 pm
I would just like to clarify (post 11); Behaving like a public company was in the context of the Proxy for foal nominations. I am recommending full transparency of all relevant information but not necessarily be strictly focused on the bottom line (EPS in case of Churchil).
I would like to see better Governance, simpler election process, more outside board members with business and industry experience who are vested in the industry.
Frankly, I have not gotten anything my own way even though I have tried very hard. Please give me your real name so that I can communicate directly with you. Very good post though!
June 7th, 2010 at 7:55 pm
My file on Breeders’ Cup is two inches thick. I was keeping a close eye on the operation for several years. Last year I did not nominate any foals because I concluded the organization is incorrigible. Why waste money nominating? It is true, nominated foals bring more money at sales - but that is just another example that statistics can be manipulated to lie.
Let me explain that.
All around the country there are stallions standing that are not nominated; likewise there are thousands of foals not nominated. The breeders involved know the produce would need a miracle to ever get into a BC race. They don’t nominate, but, they do sell in regional auctions where prices are surely at a lower level. By contrast, breeders aiming or hoping for the up-scale markets, do nominate. So it is pretty obvious the average at such venues, bolstered by a few big sales, will distort the average and the median. Is it fair to say foals nominated bring more money? It is a loaded statistic. Pure bull—-. Moreover, check the last couple of years and see how many of nominated foals sold actually covered the stud fee plus reasonable expense??
Sorry, I digress from the subject of the election.
Any banana republic election is more honest than a Breeders’ Cup election. If my accusation is wrong, why do they refuse to publish results with vote total for each candidate? Believe me - the Establishment “elects” those it feels SHOULD be elected.
They refuse to publish actual results.
A few years ago, nominees for election were required to have some skin in the game. That was changed after nominations for that year were closed. The Rulers allowed big operators to nominate mouthpieces. All were elected. Now there are many employees on the Boards who will do as their masters order.
I don’t wish to take up all the space provided by Ray Paulick, so I shall try to condense.
The present system of a vote for each $500 in nomination fees is wildly undemocratic. Last time I checked was 2006. In Kentucky alone, stallions standing for $50,000 and up developed 6,650 votes. It would take 6,650 foal nominations just to match that. That is about a sixth of the total foal population of the year. Many of the stallion masters also nominate foals. Add that to their vote power. Conclusion, people owning only mares cannot win. They cannot get a person on to the Board who represents their interests.
The stallion masters control the Breeders’ Cup. Unless the procedure is changed, that condition will continue.
Add to that, BC staffers want to write the candidate’s biographs. They do not allow for a statement by a candidate what that individual will try to do, if elected. Thoroughbred
Daily News is left to ask that of candidates.
Why is BC a registered New York corporation when it’s activities are centered n Kentucky?
Don’t believe the story …”That is the way John Gaines wanted it.” They kicked JG out of the picture before his idea got wheels.
Why did BC set up and maintain an office in Atlanta for several years? No answer forthcoming. However, we all acknowledge Atlanta is to Thoroughbreds what the Vatican is to Catholics !!??!!
While I bang on that BC will not be reformed, I offer the following suggestions to anyone who has power to try to bring about change.
Eliminate the hereditary structure which permits the “original” founders to stay on forever.
Publish a list of attendee records at all meetings since inception. Yes, all 20plus years. Anyone who ever missed two consecutive meetings to be automatically disqualified from again being a Trustee or Director.
In future, any Trustee/Director who misses two consecutive meetings is automatically OUT!
Require candiates to have a personal cash investment in the business. Working for salary at a big farm should not qualify anyone to stand for election.
Stop and think, what qualifies Greg Avioli to have his job at a salary of about $700,000 a year? What qualifies him for the job at any salary? He has never run a business involved in a competitive field.. If the job was open today, what qualifications does he have to even fill out an application?
I should stop now, because there is so much to question and expose, it would fill a book.
So far, two candidates show what I believe might , against all odds, turn around Breeders’ Cup and make it what it was intended to be. As I did not nominate, I don’t have a vote, but I commend those who do to vote for Ned Evans and Jerry Jamgotchian
June 7th, 2010 at 7:59 pm
As long as king avioli is in charge you got nuttin as they say in brooklyn
June 7th, 2010 at 8:07 pm
Mr. Redmond– could you explain to me what the “hereditary structure which permits the ‘original’ founders to stay on forever” is?
June 7th, 2010 at 8:12 pm
I bet $5,000 on last year’s BC. How many votes do I get?
If I’m not mistaken, it’s a representative democracy, no? The more you contribute, the more votes you get.
BTW, Mr. Redmond, the nurse is here with your meds.
June 7th, 2010 at 8:19 pm
Editor’s Note (see above)– Take that $5K, buy you a nice young mare in foal, and when the foal is born, nominate him to the Breeder’s Cup and you can have the right to vote. Short of that, quit ‘plaining.
June 7th, 2010 at 8:22 pm
It is, after all, called the Breeders’ Cup. Emphasis on Breeder.
June 7th, 2010 at 8:26 pm
World Cup — there’s a cup.
Stanley Cup — big cup.
America’s Cup - not much of a sailor but I’m guessing there’s a cup, right?
Breeders’ Cup — Where’s the Cup? I smell conspiracy.
June 7th, 2010 at 8:31 pm
Hey Editor’s Note– looks to me by your last post like you swallowed some of those meds you had reserved for Mr. Redmond!
June 7th, 2010 at 8:47 pm
It’s funny. I agreed with pretty much everything Fourcats outlined except for maybe the supplemental stakes program and devil’s pact with ESPN. The more international racing becomes in the U.S. the better we’ll all be in the long term. I really don’t see how people can’t connect the dots on that issue..
June 7th, 2010 at 8:48 pm
23 comments - whew, what a revoution. Go fix your glass homes. Tired conversation. Please worry about issues that really need fixing (check out Ben Liebmann’s article here: ( http://therail.blogs.nytimes.com/2010/06/06/reasons-for-the-decline-of-horse-racing/ )instead of a two day event is actually successful from most measurable metrics with the exception of tv ratings. Of course, people with short memories will forget that the ratings fell for 13 straight years on NBC before the switch to espn. All the BC haters are the definition of monday morning quarterbacks.
I hear windows shattering….
Btw, there is a horseplayer on the Board - his name is Satish
June 7th, 2010 at 9:17 pm
LMFAO– the whole point is that the only metrics the BC is successful against are the diabolically bad metrics of the industry in general with the exception of the Ky Derby. Like it or not, the industry has gotten little added bang for its buck. If you think it’s “tired conversation” to point that out and to ask why, then you got problems. Turn your proxy over to Mr. Sanan and get the heck out of the way, if in fact you have a proxy to give.
June 7th, 2010 at 9:40 pm
I like Satish and I like his ideas. He is not tired. In any event, I’m old and tired. So, take a walk down down memory lane from the 2009 BC…
http://www.youtube.com/user/BCWorldChampionships#p/a/u/0/r4yfU1XdmU4
June 7th, 2010 at 10:01 pm
The Breeders Cup election sounds like a flawed process,like most other things in horse racing it needs new blood and a “Spark Plug” to inspire change.
Post number 15,Garrett Redmond made some good points as did some others. I am just a horse player and do not know many of the people running, but I know Jerry Jamgotchian, and he will provide a spark for change and a courage to speak his mind and a logic that will be refreshing.
If Jerry Jamgotchian is elected, every Board member will pay attention.
June 8th, 2010 at 1:26 am
Andrew:
Thanks for the kind words. Please send me your ideas on how to improve the BC….
Jerry Jamgotchian
http://www.voteforjerryjam.com
June 8th, 2010 at 1:50 am
Norm:
My business plan will actually increase BC revenues because nominators would know that their fees would be paid out YEARLY and not retained by the BC for unknown uses and investments. As a major breeder in KY, I would like 90% of all revenues disbured and because of that I would nominate more BC horses because such a policy would stimulate the horse sales, as well as my consignment.
I urge you to review my website (www.voteforjerryjam.com) and why have 90,000 people at a 2-day BC event when they get 120,000+ for the 1-day KY Derby. The BC model needs adjustment and I am ready to help the BC management team become better listeners.
Thank you for your thoughts and send me some of your ideas on how to improve the BC..
Jerry Jamgotchian
June 8th, 2010 at 6:53 am
LMFAO– thanks for the link to the 2009 Breeders’ Cup hi-light promo piece. And your point?
June 8th, 2010 at 8:28 am
Voting should be proportional and split on stallion syndicates but not on foals because of the “perception of fraud.”
What am I missing?
June 8th, 2010 at 9:00 am
I agree with the post regarding the Chairman being voted in by the larger board not the “inner sanctum”. I think Satish Sanan and Jerry Jam are pushing the powers that be towards making things better and the organization more accountable. Though I do worry that Satish and Jerry may have competing paths to that end.
I don’t see that Greg Avioli has provided one ounce of true leadership. He appears to be more of an expensive personal assistant or administrative assistant for Bill Farish.
I have no problem with any of the new ideas that the Breeders Cup has put forward whether they be the two days, the 2 year old turf racing or the Marathon. I would say that they introduced too much new all at once. This makes it difficult to know what worked and what really didn’t. In principal well thought out change is a good thing. Change for change sake is the philosophy of the Obama administration and we see how well that fiasco is turning out.
June 8th, 2010 at 9:54 am
Coincidence that Satish, after trying unsuccessfully to to get elected by the small board, proposes a change to let the larger board vote the chair along with extending term limits? Hmmm….
Whatever issues you have with Avioli, Caleb B, this is a board-driven organization, not a CEO-driven one. He’s a lawyer and a sports marketing guy. Because he came from the NTRA and because he rubs some of Lexington the wrong way, he’s a lightning rod but a fair analysis is that he has done a very solid job under difficult circumstances, including managing the expansion to two days, substantially reducing non-purse expenses (including personnel and overhead) and keeping purse levels as high as they are while nomination revenues and revenue from investments both declined sharply.
June 8th, 2010 at 10:29 am
The BC has a fundamental flaw in it’s financial structure. It has the same expectations as our Social Security system: an evergrowing population of younger workers will pay today for the people who retired yesterday. Reality is, it does not work that way. The workforce is shrinking and those who are working must pay more and more to maintain the benefits of the retired workers.
Nomination fees charged on foals of 2010 are used to finance purses paid in the Fall of this year. In reality, a 2010 foal cannot win a BC purse (of any kind) before 2012; it cannot compete for the really big money - say the Classic - until 2013. Unfortunately, if nominations continue to decline there may not be enough or any money the 2010 foal can win in ‘12 or ‘13. Seems a logical question to be answered is, how are the Directors going to solve that problem?
The Federal Government can solve the SS problem by it’s power of taxation. What power does BC have to solve the problem? Until an answer is presented, mare owners might be well advised to keep in their pockets that $500 per foal. Of course, that will exacerbate the problem.
Who are most likely to have a good answer? The incumbents or a host of newcomers?
June 10th, 2010 at 8:31 pm
Mr Avioli is paid almost $1.5 million a year as head of BC and BC Charities.
Mr. Evans is paid almost $5 million a year as head of Churchill Downs.
The current executive director of The Jockey Club is paid more than $750,000 a year,
I say let these people go! Let some retired fat cat with too much time on his hands run these organizations and invest their $7.25 million in saved salaries into PURSES.