MCA Executives Grilled by Shareholders

With two separate bouts of takeover speculation spiking MCA’s stock in the last 11 months, the entertainment company might have expected its shareholder meeting this year to be its liveliest.

But no raider or other disruptive force materialized Tuesday when all eight MCA directors--including such luminaries as investment banker Felix G. Rohatyn and former Democratic Party Chairman Robert S. Strauss--gathered in a downtown Chicago bank auditorium for the company’s 29th annual meeting.

Instead, MCA executives were forced to defend the anti-takeover devices adopted last summer when speculation peaked after the three-week hospitalization of longtime Chairman and Chief Executive Lew R. Wasserman. The tough questions came not from individual shareholders, however, but from church and labor union representatives critical of certain company policies.

One shareholder inquired whether MCA might be willing to work with New York real estate magnate Donald J. Trump, who announced in February that he might acquire 24.9% of the company’s stock. Wasserman responded that the company has not heard from Trump since February, when he disclosed that he held a 0.5% stake in MCA.

Some shareholders simply seemed eager to gauge the health of 75-year-old Wasserman, who owns 7.1% of MCA’s stock and wields some control over an additional 8.4% in various trusts.

Wasserman appeared fully recovered from last summer’s surgery for the removal of polyps in his colon. As befitting a former talent agent, the MCA chairman warmly greeted dozens of people by name before the meeting and after its adjournment moved swiftly to speak privately to two Roman Catholic nuns who unsuccessfully petitioned the company to quit distributing movies in South Africa to protest apartheid policies.

“Golden Parachutes” Rapped

During the meeting, MCA President Sidney J. Sheinberg said the company received only $3 million in gross revenue from South Africa but hoped to be able to distribute there such films as “Cry, Freedom,” which addresses the issue of apartheid. If the company is unsuccessful in that effort, Sheinberg indicated that the Motion Picture Assn. of America as well as MCA may very well consider an end to their South African business.

MCA’s decision to bestow so-called golden parachutes on 300 of its executives drew a rebuke from Edward J. Durkin, director of special programs for the United Brotherhood of Carpenters & Joiners.

“You have golden parachutes that are, I think, unequaled in not just this industry but in corporate America,” Durkin said. “If you’re concerned about maximizing shareholder value, how can you justify the golden parachutes that have been implemented for 300 executives of this company?”

Wasserman responded by alluding to the turmoil triggered by his hospitalization last summer, when MCA stock soared above $60 a share on speculation that the company would be ripe for a takeover if his health failed.

“In July of ‘87, with all of the rumors that were floating around, we had a great deal of concern and confusion in our executive ranks,” Wasserman said. “We’re in a very competitive business; we’re in a very personal business. We don’t want our executive staff in a constant state of turmoil.”

Among other things, the golden parachutes would allow an executive to collect a lump-sum payment of up to three times his salary if he voluntarily quit one year after a change in control. Although MCA has acknowledged that parachutes for the top five highest-paid officers could cost the company as much as $27 million, Wasserman and Sheinberg said they could not supply an estimated cost if all 300 executives availed themselves of the provision.

Proposal Rejected

The carpenters union representative also protested MCA’s failure to solicit a shareholder vote on an anti-takeover plan that can be triggered if anyone buys 10% of the company’s stock. The plan, known as a “poison pill,” would allow MCA shareholders to buy their own company’s and the acquiring firm’s common stock at an exceptionally cheap price, thereby making a hostile takeover prohibitively expensive.

But the union’s formal proposal that MCA shareholders urge the board to rescind the plan was rejected by 73% of the shareholder votes cast in Tuesday’s ballot.

The union spent about $3,000 to solicit votes from institutional shareholders, Durkin said after the meeting. The 34-year-old union official said the challenge was not launched to retaliate against MCA’s use of contractors who employ non-union labor in Orlando, Fla., where MCA is now building sound stages and a studio tour attraction.

Wasserman, in a brief interview, said he has been informed that 50% of the company’s Orlando labor expenditures have gone to union labor, but he added that “we’re using the lowest bidder on every job.”

Fewer than 70 people attended the shareholder session. Yet the 95-minute meeting rated as one of the lengthiest in MCA’s 29 years as a public company, according to retired MCA General Counsel Morris M. Schrier, who journeyed from New York.

Wasserman has staged all 29 annual meetings in Chicago for sentimental reasons, according to his subordinates, because this is the city where the former Music Corp. of America got its start as a band-booking agency.

But as some members of the audience observed, the Chicago site discourages attendance by the company’s 16,800 employees or the lively Hollywood community.

“I didn’t even know they held (the meetings) here, and my father was on the board,” said investment executive Edward L. Heymann as he entered the First Chicago Center auditorium. His father, Walter M. Heymann, was one of MCA’s bankers until his retirement as vice chairman of First National Bank of Chicago in 1962.