Guild Strategy – A Way Forward?

A number of people over the last few months have inquired of me what approaches to the Guild’s future I might have taken had I been hired as National Executive Director in 2006. A copy of a Strategy Memo I had prepared for the Guild then is below.  

I believe the Strategy Memo remains a useful summary of the issues facing the Guild and that will continue to face the EMI sector once the current round of bargaining concludes. 
Because that conclusion is likely to be inconclusive! Only a starting point to dealing with the immense change sweeping the industry. 
I also sent a cover email to SagWatch that I have cut and pasted after the Memo here as background. It is followed by a brief comment from the editors of SagWatch (whom I presume to be SAG members though the site remains anonymous).

MEMORANDUM

To: Alan Rosenberg, President, Screen Actors Guild

Cc: Connie Stevens, Anne-Marie Johnson, Paul Christie, Steve Fried, Sam Freed, Bob Carlson, Elliott Gould

From: Steve Diamond

Date: June 14, 2006

RE: The future of the Screen Actors Guild
________________________________________________________________________

As you no doubt realize, I was both surprised and disappointed with the decision of the Guild to delay a decision for several weeks on the NED position. I had been very pleased with the approach you and I had agreed upon with respect to salary and union governance in our two-hour discussion over the Memorial Day weekend. Because of my teaching commitments in the fall, this likely makes it impossible for me to join the Guild at the present time.

I thought it might nonetheless be helpful for you to have a sense of the strategy and approach that I would have recommended implementing as NED. These ideas emerged over the past four months as I explored the very significant issues the Guild membership is facing in the $230 billion global entertainment and media industry. My frequent and in depth discussions over the last few months with the Guild leadership and members were helpful in shaping these ideas. I hope they are of some use to you and the Guild’s membership.

The Role of the NED

As you know, I believe that the Guild faces a very significant challenge in a rapidly changing external industrial environment. I believe this external change has been nothing short of traumatic for the membership. It has led the Guild to cycle dramatically between moderate and radical approaches over the last decade. This has had a deleterious effect on union morale and reputation. Thus, anyone who takes on the NED role faces a monumental task. Not only must the NED comprehend and respond to the external industrial forces, s/he must tackle the severe internal dysfunction now plaguing the organization.

As I suggested at the outset of our negotiations the NED must be responsible for five major areas of concern:

1) Negotiations with the industry;

2) Development of a strategic vision for the Guild;

3) Re-building and leading a depleted and demoralized staff;

4) Managing complex regional and occupational differences within the Guild; and

5) Coordinating relationships between the Guild and sister labor bodies, including fellow guilds and the larger labor movement.

I believe that the skill set required to take on such a role would require you to pay the NED somewhere within the range of comparable organizations such as AFTRA, the Writers Guilds and Directors Guild.

“CEO” title and responsibilities

In addition, you may recall that I was asked in the interview process whether or not I believed that the NED should be the “CEO” of the organization in light of the potential impact that title would have on the ability of the NED to negotiate credibly with the employers. I pointed out that I did not think that mattered terribly much. I did think, and still think, that the NED must be the chief executive officer for a simple reason: if the elected President is the CEO it creates a dual line of authority for the paid staff, thus tempting the staff to play politics with leaders and members, and vice versa. A better approach is to hire the right NED, who, of course, must answer to the President, top Guild officers, the NEC and the Board, and then allow the NED to manage the paid staff in a manner calculated to achieve Guild goals.

As you know, the Guild’s Constitution, consistent with California’s non-profit corporation law appoints the NED as the CEO. I believe that this has been the case at the Guild for many decades, even in the era when the NED was National Executive Secretary. This makes sense because, while the National Board has the potential to direct senior staff itself, a decision not to delegate that authority would greatly increase the potential personal liability of board members for the actions of staff. I personally do not know of any non-profit board that attempts to exercise its latent power to hire staff beyond that of the executive director/CEO. I hope this makes clear why I objected to the language proposed to me in the draft contract prepared by your outside counsel.

In light of the deep and understandable concern the Guild membership has about senior staff power and trust, the approach I recommended to you and Anne-Marie is that the Guild require the NED to engage in “meaningful consultation” with the top five union officers when it comes to the management of senior staff (those at the deputy NED level). Meaningful consultation would require the NED to take specific steps prior to the decision to hire or fire a senior staff member. These steps could include discussions between the NED and the leadership and a requirement that the NED take into account the results of such discussions in a decision about a particular senior staff person. Such steps could be made explicit in the contract negotiated upon hiring of an NED.

Of course, this assumes the Guild agrees with my view that it must, indeed, agree to honor the contracts it makes with its senior staff. As you recall, your attorney, Steve Kaplan, takes what I, and other labor law experts, consider to be an extreme position with respect to a labor union’s obligation to honor employment agreements with senior staff. According to one of the country’s leading experts on union governance, Professor Alan Hyde of Rutgers and Cornell Law Schools, federal labor law does not preempt state laws that protect the employment rights of union staff members. Thus he believes the Screen Extras Guild case that Steve argued was wrongly decided. This makes perfect sense because if, in fact, a new union leader could fire the staff of the former union leadership if would chill the ability of union members who become staff to participate in internal union democratic processes like elections. Presumably, the Guild would not have paid out close to $2 million to departing CEO’s Pisano and Hessinger if, in fact, the Guild genuinely believed their employment contracts could be voided.

Of course, Guild employees are not Guild members. Thus, it should not be necessary for newly elected leaders to dismiss union employees to insure union democracy. Union staffers at the Guild should not be playing a political role at all. They should be, and presumably throughout most of the Guild’s history were, willing to serve the entire membership through whichever leaders are elected by that membership. Certainly that would have been my goal as NED. In order to address the concern about long-term contracts, of course, you and I agreed during our Memorial Day discussion to a one-year contract with an option to renegotiate and renew the contract at the end of one year along with a one-year severance payment in case of non-renewal. I believe we both agreed this would provide the Guild with an appropriate level of flexibility at the senior staff level yet would have allowed me to attract talented senior staff.

NED salary issue: two competing models

While I do not think the outside impression of the credibility of the NED is affected by the CEO title I do believe it is affected by the salary you pay the NED. In our two-hour discussion on Memorial Day weekend, of course, we mutually agreed upon a salary of $450,000 per year. This would have placed the Guild in parity with its sister guilds. To pay the NED nearly 40% less than the average of the other entertainment industry guilds, as was initially proposed to me, would have sent a signal that the NED was, in fact, a weak figure. It may well be that that is the signal some in the Guild wish to send. However, in that case, as I suggested to you and others at various points, the Guild should take a very different approach to the NED role: create a COO position with significant control over major staff responsibilities and then hire a talented labor lawyer to negotiate your major contracts alongside rank and file activists and the elected leadership.

However, if the Guild chooses that path – and I assume the Guild’s silence since our last discussions suggests that remains the goal of some within the union – it means effectively ignoring the nature of the environment in which the Guild now lives. This is an environment of immense complexity and rapid evolution. I believe the Guild needs, and deserves, a solid and professional senior staff, one that it indeed can trust, to analyze this new environment and develop a policy menu for you and your fellow elected leaders to choose from and implement in the best interests of the Guild membership. This kind of staff is initially more expensive than the COO/Negotiator model, but I believe it would more than pay off in light of potential gains for the membership in future contract negotiations.

A new approach to Guild strategy

1. Step One: 2008 begins now.

The central motivation of such a senior staff must be the zealous pursuit of Guild goals through development and implementation of a strategic direction designed in collaboration with Guild leaders and members. The starting point of my approach would be quite simple: success in the 2008 contract negotiations requires that the Guild begin to bargain now. That may seem an odd suggestion since the contract does not expire until 2008. But as I suggested in the second in-person interview held at Guild headquarters with the search committee, the employers in your industry have already begun the bargaining process in the form of Nic Counter’s interview with The Hollywood Reporter. They are already beginning their attack on the union because they know that the technological change in the industry (broadly, the shift from a theatrical release driven model to a digital delivery driven model) is well underway (from DVDs to iPod downloads, for example). Another recent article in The Hollywood Reporter called “The New Deal” provided Counter yet another opportunity for an attack. This article indicated the huge vacuum that has been created as the talent side lawyers look to the Guilds for help and leadership. Meanwhile, the employers have begun their effort to win the hearts and minds of their consumers, their shareholders, their business partners and, most importantly, your members, with an argument about their business model in the digital era.

The Guild must begin its own offensive with an independent analysis and proposed model of value creation and revenue sharing in the industry. I believe there are three major forces changing the industry:

1) technology,

2) industrial re-organization, and

3) financial capital.

Overall, the studios are moving away from a classic close corporation model to a model of conglomerate organization and widespread institutional ownership. This is required to finance the massive technological shift underway and to support the global distribution and marketing campaigns associated with film and television today. While change of this magnitude has ordinarily been used to undermine workers and their unions, in the entertainment industry it can be argued that it has made the role of actors even more valuable. And it has made them more valuable at a point when global distribution creates hundreds of millions of new paying customers for the product they produce! This means the industry is creating a large multiple of value previously created. In addition, the move to wide outside share ownership creates an alternative line of attack via corporate governance mechanisms.

However, a classic and infamous example of what can happen if one does not engage in a Guild led strategic effort is the DVD situation. As you are well aware, the studios have succeeded in out maneuvering the Guild, and the other guilds, by retaining 80% of the revenue from DVD sales in their in house distribution arms. This now amounts to billions of dollars each year. As confirmed to me in a discussion I had with a former producer and senior figure in the industry, a similar pattern will be used in the battle over digital delivery. For example, Microsoft recently negotiated a contract with Hollywood to provide content for Microsoft’s web offerings. The Guild was not at the table during those negotiations. Instead, the studios isolate the Guild and only allow them to bargain with the producer arm of the industry. But Microsoft and Hollywood certainly had estimates of how large the pie in this environment is, and there is no logical reason that the Guild should not be part of cutting up that pie now.

2. Step two: Mobilization of Guild’s key resources

Of course, this may not be able to happen through formal collective bargaining. Instead, the Guild must begin its offensive through a variety of forums. Thus we come to the second major piece of the strategy: once one accepts that “bargaining” must begin now, the Guild must mobilize the key resources available to it in this effort.

I have identified six major resources available to the Guild for this mobilization:

1) membership;

2) staff;

3) community;

4) consumers;

5) organized labor; and

6) politics and law.

There is a wide array of possibilities with each of these resources. I will not develop these here at any length, but let me explore one resource, the membership. It is obvious, of course, that the membership must be an active and constant player in any mobilization. That first requires an educational process where the analysis developed by the senior staff and elected leaders is communicated across the entire membership. The analysis, to be credible, must explain to the members how the staff and leaders understand the nature of developments in the industry. I believe that the rancor and distrust that the members now express can be overcome as the leadership begins this process of analysis and education. Of course, this effort is an iterative one: while the NED must begin the analysis process, the conclusions reached will reflect feedback from the senior staff and leaders and then again from the first round of educational efforts from the membership.

Keep in mind here the real goal: if Guild leaders do not develop an argument about how the industries they work in are changing and how Guild members create value in that environment, then a vacuum is created in your own membership. And the employers will try to fill that vacuum. In fact, they are already trying to do so. Nic Counter attempted to do so in his Hollywood Reporter interview.

3. Step Three: Identify impact areas for Guild offensive.

Finally, the Guild must identify key “impact areas” in which it can mobilize its resources to initiate its offensive. Once the staff and leadership agree on the basic argument developed out of an analysis of the industry, it must carry that argument to the membership (and to the other resource groups) and then use those resource groups to impact the industry on the available terrain.

Four such impact areas are:

1) public at large (remember, the entertainment industry’s consumers and customers are actors’ fans);

2) capital markets;

3) political arena and legal tactics; and

4) collective bargaining and job actions.

While I could develop each of these areas in much greater detail, I think this gives you a flavor of what is required. In sum, the Guild must begin its offensive now in order to prevail in 2008. This offensive requires the development of an alternative analysis of the value created by Guild members in the new environment. That argument must then be explained and discussed and evolved in contact with the various resource groups and, in turn, applied in the impact areas the Guild identifies. I believe this has a much greater chance of success in 2008, and in other contract negotiations, than the approach suggested by a COO/Negotiator approach to senior staff.

I wish you and the Guild leadership the very best of luck.

———————
April 1, 2008

Brothers and Sisters at SAG Watch:

I appreciate the respect your site has for my blog and commentary. The period that the Guild has entered is likely the most challenging in its history and I hope that my view from the outside is of some value to members and supporters of the Guild.

Because I believe it bears on the current straits in which the Guild finds itself I would like to set the record straight on my NED candidacy. Please feel free to share this with your web audience as you see fit.

I really did want to be the NED of SAG and it is not accurate to say that I turned down the job. My initial withdrawal came in the face of a rather odd late in the game demand from the Guild that if I was to become NED that I could not hire my own senior staff (such as General Counsel) without approval of the board of directors of SAG and, further, that the CFO/CAO of SAG (which I agreed should be Peter Frank) would answer around me directly to the Board.

Of course, any NED in the non profit world or any CEO in the for profit world worth his salt would balk at such terms. To make such a demand means that the NED would become a rubber stamp of the Board. It would also mean that staff under the NED would know that they could play politics with the board around the back of the NED. And, of course, board members would be tempted to do the same. What was odd about this demand was that it directly contradicted the discussions I had with the full search committee throughout the process. In those discussions I said that I understood the historic problems the Guild felt it had had with imperious NED/CEO types and that I would be sensitive to that problem but that the only workable approach was to hire the right NED who knew that he could be dismissed if he did not carry out board policy effectively. But in return he should have the leeway to hire his own staff (with board input). Then the staff would know to whom they were directly responsible on a day to day basis.

My own theory is that a small group within MF pushed for this approach. When I pushed back and said this was neither workable nor what the search committee and I had discussed, there was no movement from Alan Rosenberg and his outside counsel, Steve Kaplan. After 10 hours of discussion into the early hours of the morning, I withdrew my candidacy. Two days later (after some people spread unfounded rumors that I had made extravagant salary demands on the Guild) I was asked to call Alan Rosenberg who reversed his earlier position and agreed to restructure the position in the form that had been agreed to in the discussions with the search committee – including my ability to hire senior staff who would be responsible directly to me. Unfortunately the very next day, after a meeting with Membership First, Rosenberg called me and said he was withdrawing the offer he had made and that was the end of my NED candidacy.

Clearly what he and I had agreed to was a threat to Membership First. In retrospect it is clear why: the MF “strategy” was to “play tough” and so they really did not want someone to develop and lead a new strategy for them. Of course, that means they would really be spending a huge amount of Guild resources ($500K per year at least) just to mimic what has been decided by Membership First – no value is added really by the NED. And, of course, the more serious problem is that the complex financial, legal and political terrain upon which the current negotiations are being played out is overwhelming the Guild leadership. I do not know if I could have made a significant difference had I been hired, but I certainly was aware of the complexity of the issues and laid them out in a lengthy memo to the Guild Board prior to the end of my candidacy. I have attached the memo here (feel free to share it as you see fit). I suggested a two year multi pronged strategy that I believe would have created an entirely different set of conditions internally and externally for the Guild as the 2008 negotiations approached.

What will happen now is anyone’s guess – as I have suggested this evening on Vallywood, Pandora’s Box has been opened.

In solidarity,

Stephen Diamond

SAG Watch Response: We’ve made it clear that we think Professor Diamond is one of the sharpest and most objective analysts in the area. We’re sorry he’s not NED, appreciate his candor, and recommend the memo he wrote, as well as his blog. We also stand corrected about him turning down the job.