readease Chapter 56 Reorganizing MGM
Chapter 56 Reorganizing MGM
The acquisition of Playboy is practically in his grasp, and Ernst's media empire has reached a new level, making him quite happy.
But less than a week later, MGM gave him a rude awakening.
The atmosphere at the board meeting was so heavy it seemed like you could wring water out of it.
When the proposal to "remove Robert Iger from his position as CEO" exploded like a thunderclap, Ernst, who had been somewhat tired and drowsy, was instantly injected with a powerful stimulant, his sharp gaze fixed on the proposer.
"What did you say?" Ernst's voice was deep and carried a hint of oppression.
On the right, a middle-aged man dressed like a gentleman from over a hundred years ago remained unfazed by Ernst's angry glare, his expression calm and composed.
"I propose the removal of Robert Iger. His decision to acquire Paramount's stake in the Titanic project for $58 million was a major strategic error, and he also showed interest in the project's stake held by 20th Century Fox."
"I believe this series of actions has seriously damaged MGM's interests and is sufficient proof that he is no longer suitable to lead MGM."
Four days ago, Robert Eitel's ambiguous attitude finally broke down Tom Jacobson's psychological defenses.
The other party mainly invited Robert Iger to dinner, indicating that they were willing to make some concessions.
After a day of talks, the two sides finally reached an agreement that MGM would acquire Paramount's ownership of the ship for $5800 million, while Paramount would lose $700 million and leave.
Unexpectedly, four days later, the board of directors used this incident to demand the dismissal of Robert Iger on the grounds of harming the company's interests.
Outsiders might be kept in the dark, but the board members couldn't possibly be unaware that many decisions regarding the Titanic project were made by them. Ernst was certain that this sudden proposal to remove him was a surprise attack launched against him.
Faced with the other party's smug smile, Ernst narrowed his eyes and, in a flash, made a move that shocked everyone present.
He raised his hand—he actually raised his hand—and agreed to remove Robert Iger, the CEO he had personally appointed.
Ernst's statement was like a boulder thrown into a calm lake, creating ripples. The proposer, who had been so confident just moments before, now showed a flicker of panic in his eyes, clearly unprepared for this turn of events.
As Ernst raised his hand, many members of the board of directors also cast their votes in favor.
"Great, majority vote in favor. We need to find a new CEO to lead MGM back to its peak."
Ernst made this statement with a forced smile, then stood up and strode out of the conference room.
After leaving, he instructed his secretary Sarah, "Notify Egger to come to my office immediately."
On his way back to the chairman's office, Ernst, as if changing his face in a Sichuan opera, instantly shed the anger he had shown in the conference room and began humming a tune with a leisurely air.
Shortly after, Robert Iger entered, his expression incredibly calm, showing no trace of the frustration and anger that followed his dismissal.
"Do you know what happened?"
"Sarah told me that Wilholman proposed my removal, and the board agreed."
Robert Iger casually slumped on the sofa, even having the leisure to ask Sarah for a cup of coffee.
"So, you're planning to purge the board of directors?"
MGM's board of directors consists of 13 members: Chairman Ernst, five shareholder representatives, one employee representative, and six independent directors.
The five shareholder directors are definitely on Ernst's side, as are the employee representative directors.
The film "The Man from Earth" brought MGM enormous profits, and these people were the biggest beneficiaries.
These people would have unconditionally supported Ernst's decision until he made a series of mistakes.
Therefore, without Ernst's approval, this impeachment was a farce and would never have passed.
Now that he's leading the way in agreeing, Robert Iger can't think of any other reason besides the independent directors.
"These guys are all from the Cochrane era, and they could never be of the same mind as us. They are even closer to Cochrane, which will become a hidden danger for MGM if it wants to go public and expand."
Ernst sneered, a sharp glint in his eyes. "I was just wondering how to deal with them, but I didn't expect to have my chance delivered to my doorstep."
Unlike Asian companies, such as those in China, Japan, and South Korea, which you can see in TV dramas, the chairman is the absolute boss.
All company decisions must be made according to the chairman's will; he is the ultimate authority, the absolute leader.
In the board of directors, more than half of the members are people placed or controlled by the chairman, and the CEO is not the chairman himself, so he is just a puppet.
Furthermore, the chairman will require shareholders to sign a concerted action agreement, which means he holds absolute power; the chairman is like the emperor within a company.
But Western companies are different. The chairman's role is simply to maintain order, and many companies don't even have a chairman.
To put it simply, they're pretty much like mascots; they have the same voting rights as directors, but with a slightly higher salary.
Another difference from Asian companies is the appointment of independent directors.
Independent directors are those who do not hold positions in the company, have no business relationship with the company, have no conflict of interest, and are able to make relatively fair and independent judgments.
These people exist for the benefit of all shareholders and to prevent internal corruption and other problems.
For example, if a company's board of directors consists of senior executives, and they get together to discuss giving all the executives a 100% raise and buying them houses and cars, this would be detrimental to the interests of the shareholders.
With independent directors, things are different. They have no vested interest in the company and can vote against anything.
In Europe and America, it is written into law that independent directors must constitute a certain number of directors.
For publicly traded companies, the requirements are even stricter. Whether it's Nasdaq or the American Stock Exchange, they all require that at least half of the directors be independent.
Many companies have more than three-quarters of their directors being outsiders, and McDonald's is even more extreme, with all of its directors being outsiders.
Leakage of rights? Not at all.
In Europe and America, one of the most important rights of directors is to appoint and dismiss management. The management and operation of the company are the responsibility of the management team, and this distinction is very clear.
Ernst could not remove these directors unless they committed serious misconduct.
Even if a major error occurs, Ernst can only convene a shareholders' meeting and let the shareholders decide whether to remove the board members.
Simply put, if the board of directors is dissatisfied with the management, they can fire them directly, and if shareholders are unhappy with the board, they can remove them from their positions.
Neither of these two levels will participate in any management of the company; all management is the responsibility of the management team.
Once MGM goes public, it will either need to increase the number of board seats or add independent directors to replace some of the current shareholder directors.
At that point, Ernst's control over the board of directors will be unbalanced. Although Ernst is MGM's largest shareholder, he does not have absolute control.
As long as the board of directors is not on his side, internal chaos cannot be avoided.
In severe cases, he might even be kicked out of MGM.
Ernst chose to list MGM to obtain more funds for MGM's development. If these people cause trouble and take the cash flow from the books to distribute as dividends, Ernst will be powerless to do anything about it.
Robert Iger understood perfectly, and even revealed a hint of smugness: "So I can take a vacation and have a good rest for a while?"
Ernst raised an eyebrow. "It's best to go somewhere far away, so they can't find us."