According to this article on Philly.com, the orchestra management of the Philadelphia orchestra could be threatening chapter 11 bankruptcy during the organization's contract negotiations. Highlights of the article:
"Players - who could see a 20 percent cut in base pay and the loss of 10 positions - are taking the threat seriously. They would like any eventual deal to include a commitment that management will not seek bankruptcy protection, whose stigma they feel would both damage the orchestra's reputation and dampen fund-raising and ticket sales.
"Some orchestra board members are advocating bankruptcy - despite the fact that the group has no debt and an endowment well north of $100 million - because they believe it would allow management to no longer fulfill its pension obligations, board members and others say.
"Philadelphia's two sides have been meeting to reach a deal on salary, pension, work rules, size of the ensemble, and other matters as the orchestra's leadership responds to sagging attendance and a budget gap that administrators and board members variously have stated as being from $7 million to $14 million annually.
"Administrators have declined to commit to a specific operating deficit figure, or to say how they arrived at it."
I have to say that certain facts of this article confuse me. How can an organization file for bankruptcy if it is in fact not bankrupt? Also, how are the administrators and board members on such different pages in terms of the budget gap? Certain aspects of this situation remind me of the Oakland Symphony case study from our intro class...
I also don't understand how an organization can declare bankruptcy with such a large endowment. It seems like there needs to be a lot more transparency from the management in this situation. I think this is just a scare tactic that the administration is trying to use on the musicians.
ReplyDeleteEndowments have certain restrictions. You're only allowed to do certain things with the money as denoted by donors who created the endowment. For example, if an endowment was set up to help pay for performance hall renovations/maintenance that is the only thing that endowment money can be used for. Also, endowment are super special savings accounts. You're only allowed to draw a certain amount which is voted on by the board of the company or the board of the endowment/foundation, depending on how the endowment is set up. If you continually draw large sums from your endowment, you won't be able to grow it. Drawing from your endowment to cover operational costs one year is a quick fix, but what about the long term? Where are you going to get the money to pay for anything?
ReplyDeleteLastly, bankruptcy doesn't mean you are completely out of money in the present. According to The Free Dictionary: Legal bankruptcy is defined as "A federally authorized procedure by which a debtor—an individual, corporation, or municipality— is relieved of total liability for its debts by making court-approved arrangements for their partial repayment." When a company file bankruptcy they are trying to wipe their slate clean. However, that requires a LOT of red tape and restrictions. Also, there are 4 different types of bankruptcy, with different requirements for filing. Not every organization that files for bankruptcy has to close its doors.
For more information on how finances actually work, please take Intro to Arts Admin with Jean.
http://legal-dictionary.thefreedictionary.com/bankruptcy
http://www.bankruptcyinformations.com/different_types_of_bankruptcy_laws.htm
Excuse me, I mispoke. There are actually 5 types of bankruptcy.
ReplyDeletehttp://www.thebankruptcylawyer.net/types_of_bankruptcy.htm