BREEDERS’ CUP AND THE IMPORTANCE OF PARANOIA

by | 11.17.2010 | 12:47am
By Ray Paulick

“I'm often credited with the motto, 'Only the paranoid survive.' I have no idea when I first said this, but the fact remains that, when it comes to business, I believe in the value of paranoia.” – Andrew Groves, founder and former chairman, Intel Corporation.


“Just because I'm paranoid doesn't mean they aren't out to get me.” Anonymous.


There appears to be a mixture of both paranoia and rational thinking when it comes to how governance over the Breeders' Cup has evolved in the last decade among the different camps that have fought behind the scenes to control this critically important industry organization.


For most of its 25-plus years, the Breeders' Cup was run by a small executive committee headed by Jockey Club vice chairman and Lane's End Farm owner William S. Farish, and later by G. Watts Humphrey, a Jockey Club steward and a partner in many of Farish's equine interests. Board meetings were perfunctory events where self-perpetuating members of the Breeders' Cup board did little more than rubber-stamp decisions made by the executive committee. Breeders' Cup management carried out those directives.


Some breeders grew increasingly frustrated over this “private club” style of leadership and made demands for change: specifically, a more democratically elected Breeders' Cup board of directors and one that isn't controlled by a small executive committee. Significant change came in 2005 with amended corporate bylaws and articles of incorporation that allowed breeders who nominate foals and stallions to the program to vote for a board of 39 members and trustees. Those members and trustees would then elect a smaller operating board of directors to guide the organization.


At first blush, it looked as though the individuals who had controlled the Breeders' Cup (namely Farish and Humphrey) were acceding to a democratic system (or at least one based on one vote per $500 in Breeders' Cup nominations). But a closer look suggests they may have found ways to tip the scales of the election in their favor. In fact, a Farish has been able to maintain control of the Breeders' Cup under the new election process, but it's William Farish's son, Bill, who has held the title of chairman of the board since the new system was adopted and the first reconfigured board of directors elected in 2006. 


The “election” of Bill Farish as chairman was a fait accompli even before the new board had its first meeting. “We have decided to elect Bill…” several newly elected directors were told on the eve of that first meeting, at which there was little discussion about a chairman. Farish has two years left to be chairman (term limits prohibit anyone serving more than five consecutive years as Breeders' Cup chairman or vice chairman), and ground work is said to already be under way for Reynolds Bell, who does bloodstock work for Lane's End, to replace Farish as chairman.


Back to the election of members and trustees. There is a section of the bylaws that permits the standing board of members and trustees to veto anyone voted onto the board by stallion and foal nominators. That authorization hasn't been used since it was incorporated into the bylaws, but why is it even there? Is it possible this may be used in the event the people in control of the Breeders' Cup become paranoid and worry that their grasp on power is in jeopardy?


Another example: Why would the current bylaws allow corporate officers (including paid employees) to participate in the election for the board of directors? Whether you are paranoid or thinking rationally, you'd have to assume that the paid officers, if they wanted to keep their jobs, would vote to maintain the status quo. The same goes for the section in the bylaws that allows past presidents to vote in the board of directors election. Currently, James E. Bassett III and D.G. Van Clief Jr. are permitted to vote for the board of directors at the annual meeting of members and trustees. Whenever the tenure of current president and CEO Greg Avioli ends, he will also have the right to vote for members of the board of directors.


Would it be paranoid to suggest that these three officers and two past presidents would be considered “safe” votes for the incumbents, as, represented by Farish and son?


For this year's election of the board, to be held in July, the three corporate officers have agreed to abstain from voting. That's a good move to alleviate concerns over conflict of interest, but the clause permitting their vote should be stricken from the bylaws. Past presidents Bassett and Van Clief should also agree not to vote in the election, and there is no reason to include past presidents in this decision making process.


Then there is the matter of the Founding Members, those individuals who put up $10,000 apiece as seed money when the Breeders' Cup was established. The current founding members are Brownell Combs II (formerly of Spendthrift Farm), William S. Farish (Lane's End), Jim Friess (appointed by Claiborne Farm's Seth Hancock, the actual founding member), Brereton C. Jones (Airdrie Stud), John T. L. Jones Jr. (director emeritus of Walmac Farm)and John Nerud. It may have seemed like a good idea at the time to give certain lifetime rights to these individuals, but at least two of these founding members are no longer active in the business and it makes no sense for them to be able to vote annually on the election of board members. This is especially true when you consider the individuals (Sheikh Mohammed, John Magnier, Robert Clay, Tom Simon, Duncan Taylor, among others) who have put up huge sums in nominations and have to stand for election in order to have a vote for the board of directors.

So what we have is a sort-of democracy. One that allows nominators to vote for members and trustees (whose sole authority is to elect a board of directors), but which also says the existing members and trustees can exclude whoever has been elected by those nominators. It's a democracy that gives current and past paid employees just as big of a say in shaping the board of directors as people who have put millions of dollars into the program and have to stand for election.


To the credit of the Breeders' Cup, there has been progress (click here to read the Paulick Report article on this year's election), though it would not have been made without criticism, paranoid or otherwise, of how the current election system is shaped. The old guard that's run the Breeders' Cup has come a long way, but there's more to be done.

Copyright © 2009, The Paulick Report

Support the Paulick Report. Make a donation today.

Visit the Paulick Report for all the latest news throughout the racing world

Sign up for our Email Flashes to get the latest news, analysis and commentary from Ray Paulick

Twitter Twitter
Paulick Report on Instagram