"Just what do you base
that
figure on?"
There was an awkward pause, during which David Chasman, a senior production vice president, whispered to Dan Melnick, "Norman's total
l
ed the grosses of
The Three Musketeers
and
The Four Musketeers,
and it averaged out to three million per musketeer."
Melnick repeated Chasman's line aloud. Amid the laughter,
Hirschfield
said, "That's as good a basis for an estimate of the gross of a picture as I've ever heard."
Having failed to induce Jimmy Goldsmith, Philip Morris, Time Incorporated, or Penn Central to make a bid for Columbia, and having failed also to dilute Herbert's power by merging with Mattel or Filmways, Alan
Hirschfield
by June had begun to consider the more drastic alternative of himself leading a public fight for control of Columbia Pictures Industries. The fight would take the form of a so-called proxy contest in which one who aspires to take control of a corporation nominates his own slate of directors and officers, and the shareholders then elect either the dissidents or the incumbents.* Proxy fights are very costly in money, time, and emotional energy, but sometimes they
are
the only way. A number of people had urged
Hirschfield
to wage a proxy fight; Mickey Rudin had suggested that he consider it as far back as the fall when it became clear that the board of directors was going to oppose his decision to fire Begelman.
Hirschfield always had felt that Herbert Allen's and Matty Rosenhaus's control of Columbia Pictures—represented by their ownership of 18 per
cent of the stock—was thin. Although it was widely assumed that they could influence enough additional shares to comprise a majority. Hirschfield had come to believe that if he could mount a strong and compelling challenge, he would stand a good
*
Like many procedure
* in large public corporation,
contests for control are waged almost entirely by mail and newspaper advertisement, with the shareholders vending ballots, or
"proxie
s." to the representatives of the side t
hey favor. Hence the label "prox
y fight. '
chance of attracting a sufficient portion of the 82 percent
not
owned by Allen and Rosenhaus to give his side a majority and thus victory in a proxy contest.
Hirschfield had discussed a proxy fight with his lawyer, Robert Haines, and with Allen Adler but with no one else. Secrecy was crucial.
Hirschfield
was sure that if Herbert Allen learned that such plans were afoot he would fire Hirschfield immediately, thus rendering the battle much more difficult to wage. Hirschfield, however, did authorize Robert Haines to take the necessary preliminary steps, and Haines began on Wednesday, June 14, by retaining a top attorney who specialized in proxy fights to manage Hirschfield's effort. The attorney was Sidney J. Silberman, a senior partner of the renowned Park Avenue firm of Kaye, Schole
r, Fierman, Hays & Handler. Kaye
, Scholer was not a show-biz firm. It offered a full range of corporate legal services, and its clients included Bankers Trust Company, Texaco, General Foods, and New York Life. It had a reputation as a tough litigator of antitrust and other intricate corporate legal issues. When Bob Haines called, Sid Silberman had just spent several months representing the Curtiss-Wright Corporati
on in a struggle to take over Kennecott Copper. Silbe
rman told Haines (they had been students together at Columbia Law in the forties and both made the law review) that he would be available whenever Alan Hirschfield wanted to begin.
On Thursday morning, Hirschfield had breakfast with Ray Stark at the producer's antique-brick home on Mapleton Drive in Bel-Air. They ate in the dining room and then settled with coffee outside in the sun in Stark's sculpture garden.
"Look," said Stark, "whether you believe it or not, I'm really your friend and I want these problems to get settled. Why is it that you don't want to hire Bob Stone?"
Hirschfield
sighed, and recited the reasons.
"Well, I don't know the man," Stark said, "but he sounds like he would be good for the company. If it will solve your problems with the board, it seems like a small thing to do. You're crazy if you don't. You're throwing away a promising career. You've built a wonderful company, along with David and Herbert. I don't know why you're being so stubborn. It would make Herbert happy, it would make Matty happy, it would make Irwin happy. It would prove to people that the company's not out of control and that you're doing something."
"Ray, if I hire Stone, it will not be a signal that the company's in control. It will be a signal to everyone in the company that I, in effect, have lost control of the company, and that
I
am simply the board of directors' errand boy. The issue really isn't whether I get a new contract. The issue is whether I keep faith with people who have broken their asses for five years to make this company work. It would be an absolutely corrupt act on my part to hire someone I know is wrong."
Stark tried to sway him, but
Hirschfield
said:
"I
don't see the
logic of how hiring one man woul
d suddenly erase the last eight
months of turmoil und blatant ha
tred showed by the board toward
me. These things don't disappear ove
rnight. I view this purely as a
test of wills. I've always tried t
o accommodate the wishes of the
board over the years, and I've probably
been too flexible. But this is
a question of right and wrong." ,
In addition to plotting cabals, putsches, and proxy fights, as well as pondering more modest means of curbing Herbert Allen's power, Hirschfield by the middle of June also had conferred at length with attorney Haines on ways in which Hirschfield's rights under his Columbia contract might be asserted to combat the board of directors' conduct toward him. Bob Haines felt it would be wise for
Hirschfield
formally and explicitly to identify his grievances as a basis for possible future legal proceedings against the board. Thus, Hirschfield and Haines draf
ted a formal letter to Leo Jaffe,
in his capacity as chairman of the board, claiming that several of the board's actions constituted breaches of
Hirschfield
's contract, which gave him the "authority" to run the company and prohibited actions which "detract from such authority
...
or render it difficult or impossible
...
to carry on his duties."
One of the latest breaches, the letter charged, was Irwin Kramer's action ". . . deliberately, in my judgment, seeking to embarrass or harass me by raising again questions regarding my wife's employment . . . which ended over eighteen months ago. which was voluntarily disclosed by me about three years ago. which was reviewed by the Conflicts of Interest Committee (of which Mr. Kramer was chairman) over two years ago
....
which has been cleared by our inside and outsi
de counsel, and which has been a
nd is still being pursued. . . .
The only real purpose of the expenditure of time and money involved in this is to detract from my authority and render it difficult for me to perform my duties."
The letter also cited a provision in Hirschfield's contract giving him the "right to approve the appointment of any officer of Columbia. . . .
"In this connection is the present attempt by Herbert Allen and other board members to force me to hire as chief operating officer of the corporation a man I rejected for any position in the company several months ago. They have impl
ied that any new contract for me
would be contingent on this hiring. Such efforts have continued despite my conclusion and those of my associates that his employment would severely disrupt the operations of the company and that I believe him to be the wrong man for the job. This move has caused severe consternation and unrest among the key executives of the company, further undermined my authority, and severely jeopardized my own effectiveness as chief executive officer."
Only Hirschfield and Haines knew about the letter, and Hirschfield had not definitely decided whether to send it. He took the draft with him to California to refine it and, while there, showed it to Allen Adler. Adler, who normally counseled an aggressive posture, advised caution. "This letter forces them to respond, and you might not like the response you get," Adler warned. Nevertheless, Hirschfield dispatched the letter to Jaffe, who was very distressed.
"I feel it will cause an open breach with Herbert and Irwin and all of them," Jaffe said. "They'll take it very badly."
"Leo, the open breach already exists," Hirschfield said. "If they want to go to war, as they have threatened, fine. I'm not going to sit back like some shrinking violet and just let them walk all over me as they have for months."
Jaffe decided to keep the letter to himself and not distribute it to the rest of the board for the time being.
FIFTY-SIX
The Audrey Lisner embezzlements, which quickly had become the catalyst for new tension between Hirschfield and the Columbia board of directors, culminating in the declaration that the company was "out of control" and Herbert Allen's insistence upon hiring Robert Stone, still were known to only a small number of people within the corporation and the Los Angeles District Attorney's office. Although Columbia had had little choice but to cooperate with the district attorney's investigation, once the DA had been tipped to the crimes by an anonymous informant, the company naturally hoped that the Lisner episode would remain private. On Tuesday, June 20, however, the DA's office announced publicly
that it had charged Audrey Lisne
r with grand theft and obtained a warrant for her arrest. To Columbia's dismay, the announcement made headlines across the nation and the media naturally stressed that the embezzlement was the second at Columbia Pictures within months. UPI's story, which was published in hundreds of papers, was typical: "Columbia Pictures, barely recovering from one alleged money-stealing scandal, was rocked Tuesday with another—the chief accountant of its television-commercial division has been charged with embezzling more than $250,000."
Robert Stone met with Herbert Allen to discuss the general conditions of his prospective employment al Columbia Pictures Industries. They talked about such things as his salary level, and while no binding commitments were made, they encountered no obstacles. The meeting further bolstered the indication given Stone on the morning of June 6 that Allen and Rosenhaus wanted Stone to take the post of executive vice president and chief operating officer of the corporation.
Hirschfield had set aside much of the week for budget reviews of Arista records, Gottlieb pinball machines, and the Screen Gems television-commercial company. But his schedule was interrupted when Matty Rosenhaus called Leo Jaffe and said that several members of the board wanted to meet on Thursday to discuss two subjects: Alan Hirschfield's contract and Columbia's internal financial controls. Rosenhaus refused to be more specific. Jaffe immediately informed Hirschfield, who became suspicious. It was unusual for a board meeting to be called on short notice. Perhaps they were going to fire him. They knew that he was scheduled to preside at a meeting of the presidents of all of Columbia's divisions in Chicago beginning on Sunday. Perhaps the board feared that he was organizing some sort of cabal, or dramatic public gesture to further his own cause against the board. He had no choice, however, but to attend the board meeting and face whatever the directors presented.
Herbert Allen began the meeting by stating that it was "appropriate" that negotiation of a new contract for Hirschfield be "commenced." (The board was contractually obligated to begin negotiations by Jul
y 1, eight days away.) Leo Jaffe
pointed out that the board had already authorized such negotiations the previous February but had not proceeded beyond a few preliminary conversations. Those facts notwithstanding, Herbert suggested that negotiations should begin and the board agreed.
Herbert then introduced a second resolution, which he read from a draft he had prepared. "It is incumbent upon this board of directors that we act in swift, diligent, and thorough manner to review the structure and function of the operations of Columbia Pictures Industries." Herbert spoke as if he were delivering a formal speech in a large hall, his voice revealing uncharacteristic amounts of anger and passion. "We have been the target of more than two defalca
tions and major thefts—one
after the audit committee recommended remedial steps, which were ignored by Columbia management.* We are the trustees of a great and prospering enterprise which is encountering correctable operating difficulties. In order to regain a fine