Monthly Archives: December 2012

For those of you who haven’t caught it yet, Mr. Doug Kelley (of management) and Mr. Tony Ross (of the musicians) went at it on Almanac last night.

Here’s a link.

And here’s my transcript…

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Eric Eskola: Concerned comments from the conductor; City Council action; editorials; votes of no confidence. A lot has happened in the past month when it comes to the ongoing labor dispute at the Minnesota Orchestra. Symphony musicians have been locked out by management for two months now; we thought it was time for both sides again to visit the couch. Doug Kelley sits on the orchestra’s management negotiating committee; representing the union is Tony Ross, principal cellist at the orchestra. Well, Mr. Ross, let me start with you. The independent audit that has been sort of at the center of this is due out next week. Will that get things off the dime here, or – ?

Tony Ross: No, we’re really looking for an independent financial analysis, not an audit that is produced by their side. There’s so many fuzzy numbers, numbers we don’t understand, that we need an independent joint analysis to be able to go further at all. And an audit just simply doesn’t do it. It looks backward. The analysis looks forward, looks at all kinds of things, as far as you know, management’s – the atmosphere of management, the workplace, the mission statement, the future of the band.

Cathy Wurzer: You’re still dealing with a structural budget problem, no matter how you slice it, correct? According to information from the Star Tribune, minutes of board meetings and that kind of thing, you’ve had the structural budget problem for a while. And from 2009 to 2011, there was no public mention of any trouble. So I’m wondering here. You opened the door to accusations that you misled the public, your donors, and lawmakers during that time.

Doug Kelley: Well, I’m glad you asked, because I’d like to put that to rest. We, like every other organization, we have income, and we have expenses. And they are certified by an outside accounting firm every year. And those numbers are given to the musicians. We file a tax return. Everybody knows you don’t lie on your tax return. And that’s given to the musicians every year. I think the dispute this week is about the budget and how that works. Let’s say we budget $8 million to come from the endowment, and at the end of the year the expenses are greater and we draw $10 million from the endowment. That number – every penny – is accounted for. It goes down, put on all the income tax return and everything else. It’s as transparent as you can be, and we have done that every year, and those numbers are public. The musicians have them. If they want to do a forward-thinking analysis, the first place they’d go would be to a certified financial statement or tax returns. Those are sort of the gold standard documents in financial analysis. And I think that the musicians should really kind of back off the accusation that we misled the legislature. We gave them every number and were totally transparent with them.

CW: However, Mr. Henson in January 2010, talking about bonding money in front of the committee said, “On the financial front, we have announced balanced budgets over the last three consecutive years. We are facing the current economic downturn with stability.” But that wasn’t the case.

DK: The orchestra’s 110 years old. It’ll be on for a long time after this dispute is over. But. So when you take that $10 million out of the endowment and you cover your expenses, you match income with expenses. That’s a balanced budget by anybody’s definition. And the other thing I think that’s a little exasperating is the musicians knew we were trying to figure out how to put the best face on it. We talked to the musicians about that. We shared those numbers with them as early as 2010.

TR: Yeah, I’d like to respond to that, if you don’t mind. And it’s true. They did talk to us, in a kind of clumsy attempt at negotiating ahead of time, with the entire group, I must say. Those numbers were still fuzzy. And when you read the last three years of minutes of board meetings, it is really appalling. It’s appalling that they want to represent balanced budgets to make it look good for the legislature, make it look good for the donors, and also they specifically state, let’s plan to have a deficit when we’re negotiating with musicians. This will help us. How can we have trust in that, Doug? How is it possible for us to have trust in you, to have trust in Michael Henson when we hear the tape of him bragging to the legislature about three years of balanced budgets in a row, and then sock it to the musicians, because really we’ve been in the dumps for three years, but we just didn’t tell anybody else. The numbers you guys showed us at those meetings are interesting. The first meeting we had, I think Michael Henson said that, well, this is all planned on the new high of the Dow being seven to eight thousand. Obviously, that’s simply not true. So there’s so many questions. It’s not – We love our board. We love our volunteers. We know they’re there for us. The kind of proposals you have on the table will turn this orchestra into a minor league band. Period.

CW: I want to hear a response here from Mr. Kelley.

DK: Yeah, let me just say, what happened in between the time before and now in how we report these numbers is the recession. The musicians have been shielded from the recession. You had a 25% increase from 2007 to 2012. And you remember that first big meeting – I think you were just referring to it – Richard Davis and Michael Henson came in front of you and told you exactly what they were doing. They said, “You know, we have reported that we have balanced the budget and we have announced that publicly. And we’re also telling you that we’re about a million five short and we’ve done that because of donors. And you guys knew every bit about that, and that’s why I think it’s so disingenuous to go to the legislature. But now the thing that happened was the recession, and the recession went, we predicted that the endowment would be $230 million. It’s $130 million. Contributions dropped off a cliff. That’s what changed. And that’s why – and not only our orchestra, but orchestras across the country have been saying, we cannot keep kicking the can down the road. We have to balance these budgets and we have to have a sustainable model.

CW: Mr. Ross. Response?

TR: Well, I can’t disagree with having a sustainable model, especially a sustainable artistic model. And we have to live in the real world. Orchestras across the country – this is not true. I’m sorry. There are three orchestras, maybe two, that you’re referring to. When I read the minutes of the meeting, the board obsessed about Detroit. Are we equivalent to the Detroit orchestra? I don’t think so.

CW: You said “live in the real world.” May I ask this…other businesses across the country – other orchestras, musicians have taken pay cuts. Aren’t you going to have to take a shave here somewhere along the line?

TR: That’s a fallacy. Some have taken cuts. Some are going along – our peer orchestras of Cleveland, National, the two California orchestras, New York Phil, Chicago, have all taken modest pay raises. Our equivalent orchestra – the closest orchestra to us is the Cleveland orchestra, which has, in my opinion, not the level of – it’s not thriving, like Minneapolis, the town of Cleveland. And so there are…if we want to look down, if we want to look at the failing orchestras, and model ourselves after them, yeah, we should take big cuts. I don’t want to do that. I want to look up. This orchestra is world-class; it plays better than any orchestra in the world right now; and it’s on the precipice – another cliff, and we will fall and become minor-league very soon if this doesn’t get settled.

CW: The musicians say, Doug Kelly, that they do not have confidence in Mr. Henson. Has the board voted – has the board discussed Mr. Henson? Do you have full confidence in him?

DK: Yes, we do. Absolutely. And we just – we had a committee meeting to discuss Mr. Henson. Mr. Henson has the unanimous full support of the board. I think the reason the musicians have been unhappy with Mr. Henson is because when he first came, he said you have this structural deficit, it is here, you need to address it, and he started to address it, and that makes everybody nervous when you start doing that, and to put it on a sustainable basis, is going to take some real changes.

CW: Tony Ross.

TR: This is nothing new to us. I’ve been in negotiations here for twenty years. I’ve been in the orchestra for twenty-four; it’s my twenty-fifth season. We’ve always had this same discussion about financial sustainability and deficits. The reason we have no confidence in Michael Henson is his ability to tell different parties different things. We feel it’s totally disingenuous on his part. From three years ago, today he and our top manager have made the most toxic work environment you can imagine. This is a non-profit artistic organization. We have 95 artists that are coming here trying to do the best job we can every year, and we’re getting threatened by our managers and our HR department on a daily and a weekly basis. Never in my thirty years in this business could I have imagined something like this.

EE: How’s this going to get settled?

DK: You know what? I hope that instead of going off on these frolic and detours, we just come back to the table and help us settle and solve this problem. They – we made an offer in April, and they have not made a counter to this date.

TR: We made counters, and if you want us to make a more detailed counter, we need that financial analysis. And I’d like to ask you, Doug: what are you afraid of?

DK: We’re not afraid of anything –

TR: Well, let’s have it!

DK: We have opened our books up totally. We don’t need to take another frolic and detour into something that won’t help any –

TR: Can I say an example that makes me say that?

EE: Real quick.

TR: For once in the minutes it says, and there’s very few times they speak of this, there’s a gift of half a million dollars. And the board says, what should we do with it? It was given to the orchestra. Well, ten percent of it goes to operations. And ninety percent of it goes to the building fund – the lobby part of the building fund. These are gifts given to the orchestra. We the players are the orchestra. We make the sound. This is why this orchestra has its reputation. It’s not because we put a fancy lobby on.

DK: Nobody on the board comes to this with any enthusiasm. We come with heavy hearts, but we cannot go on. The endowment will be depleted in five years if we can’t keep drawing on it.

EE: Thank you both for coming. Hope it works out.

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Well, I’m going back to delaying and frolicking now…

A visual representation of what this blog is all about, according to Doug Kelley