Donald Sterling : Business or Personal?

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A leaked conversation between the owner of LA clippers basketball team Donald Sterling and girlfriend/side chick/mistress V Stivano has sent shock waves across the sport and around the world. Mr Sterling who bought the club in 1981 for $12 million was alleged to have expressed very strong racist views to Ms Stivano, insisting that she does not bring any black people to the clippers’ games. He also forced her to remove all pictures she had on her Instagram with black people – particularly expressing his anger any a picture she posted which featured legend Magic Johnson. His views have not sat well with influential figures from all sectors but most importantly within basketball. NBA commissioner Adam Silver announced that they will be banning Mr Sterling from being involved in the NBA for life. He won’t be able to attend any professional basketball games or be involved in any of the Clippers’ operations. He was also fined $2.5 million – the maximum fine that could be imposed.

The outline above leads to the following question

“When does business become personal?”

I start by discussing LA and the clippers in general. The Clippers were founded in 1970’s and play in the western conference of the NBA. 85 percent of their 2013-2014 roster is black. Interesting especially when you out into context there is a 70 percent average across the league. As mentioned above, Mr sterling bought the club over 30 years ago for $12m and now according to Forbes the Clippers is now worth no less than $575 million. Now how much of that amount is intangible? Goodwill plays and important part in the strategic decisions made by the guys in charge and are impacted by all different operations of the business. From your Corporate Social Responsibilty (which the club could have to take into account the 10% of LA residents that are African American) to the organisations you strategically associate your company with.

Goldman Sachs Business Principle number 2 states:

our Assets are our people, capital and reputation

The Clippers ‘reputation’ has taken a battering. Their on field achievements including their reaching of the playoffs have been overshadowed by recent events. Mercedes Benz, Virgin America, CarMax have ended their sponsorship agreements with them. Other sponsors have suspended ties until the situation has been resolved. Even President Obama had something to say on the matter.

“When Ignorant folks want to advertise their ignorance you just let them talk”

These companies who have been quick to end/suspend ties realise how much of a ‘survival of the fittest’ culture business is. It may be the personal values and ethics implemented by an organisation that determines decisions made but the underlying reasons behind those decisions remains the same – business. There are many consumers who do not want to be associated with troubled brands either directly or indirectly. Yes some don’t care, but in such competitive landscapes the finest details make the difference between a sale and a fail.

The NBA have had to act quick also in their best interests and they did. Slapping Mr Sterling with not only the maximum fine possible but with a lifetime ban from the sport was welcomed by the majority of owners and players. I also welcomed the swift action taken. No independent review or waffling straight action. Direct punishment hitting the man where it hurts. UEFA should use this as a blueprint for racism in football. Ban racist players for a year or even indefinitely depending on the severity. Hit clubs with fines that hurt (for example playing behind closed doors for half a season) not paltry slaps to the wrist. That’s how you eradicate it from grounds where young children are brainwashed into believing the idiotic ways of some is the correct way to follow. But let me not get sidetracked – Back to Donald.

These marketing sponsorships would have been bringing in a few hundred thousand dollars at least so this can prove to be very costly to the Clippers business model in the long run.

It’s an interesting topic to see how the personal can affect the business or the position of authority held by an individual. Let’s look at two cases across different sectors.

Gurbakash Chatal, a very successful founder of 2 companies was fired after activists called for his sacking due to the fine he received due to a domestic violence incident with his wife. Ex Co-op Bank chairman Paul Flowers was filmed buying 300 pounds worth of cocaine last year. This leads me to the million dollar question

“Can an individuals professional ability/potential be assessed on their private life? Or is that too personal?”

What next for Mr sterling anyway? Well he apparently doesn’t want to sell even though his return on initial investment would be 4792% – that’s craaaaazy! 22 if the 29 other owners have to support the forced sale imposed by the NBA and the commissioner is confident that would be the case. If he does have to sell the new owners would be taking over a healthy organisation. In the most recent financial year they brought in annual revenue of $128 million and. $15 million profits. This is good figures considering they do not being in the attendance figures some of the other clubs in the NBA do.

There has been a lot of interest in purchasing the club, with some reporters that it’s between a consortium spearheaded by Floyd Mayweather and Oprah, although I may have something to say about that Lol!

In conclusion, this incident has shown that a fine line has to be kept between business and an individuals private life as it can have devastating effects on not just the person but their business or professional ambitions. Business can get personal.

@capitalmoments

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