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Why The Entertainment Business Needs Corporate Governance

I recently was sitting at home watching David Letterman’s show when actor Alec Baldwin strolled onto the stage to the band’s rousing, up-tempo version of the theme song from “The Shadow,” which at that time was Baldwin’s most recent film. The studio audience went wild.Well, why not? Alec Baldwin is a glamorous sort with an …

I recently was sitting at home watching David Letterman’s show when actor Alec Baldwin strolled onto the stage to the band’s rousing, up-tempo version of the theme song from “The Shadow,” which at that time was Baldwin’s most recent film. The studio audience went wild.

Well, why not? Alec Baldwin is a glamorous sort with an equally glamorous wife, the lovely Kim Basinger, and he cares deeply about important ecological issues. This particular evening, he was talking about the illegal traffic in exotic parrots smuggled out of the Amazon rain forest and sold at exorbitant prices in the U.S. It was at that moment I finally figured out how the movie business works.

To wit: Although he commands salaries of $2 million and up, no one would describe Alec Baldwin as an actor who “opens” films; that is, people don’t pay to go to a movie just to see him. Arnold Schwarzenegger opens films. Sylvester Stallone opens films. Clint Eastwood opens films. Alec Baldwin doesn’t.

Yet because Alec Baldwin is a movie star-that is, a good-looking man who happens to be in the movies-the Republic’s institutional memory fails whenever he appears on TV. Witness Paul Shaffer and the Letterman band’s decision to play the theme song from “The Shadow” as the actor’s signature tune. This makes no sense. “The Shadow” was a bomb. Introducing an actor by playing the theme song from his last bomb is like introducing a baseball player by showing a videotaped replay of the last fly ball he dropped.

What you realize when you watch late-night talk shows like Letterman’s is that people in the movie business, alone among industries I know of, are never called to account for their failures. Recently, I saw Garry Marshall yukking it up on “Late Night with Conan O’Brien.” Marshall became famous as the producer of popular TV sit coms and also had a huge big-screen success directing “Pretty Woman.” But his most recent venture was “Exit to Eden,” an atrocious comedy that lost megabucks. Yet there was Marshall, joking with Conan O’Brien.

This sort of thing doesn’t work in other industries. After Joseph Jett was fired for making $350 million in phantom bond trades at Kidder, Peabody, nobody asked Jack Welch, CEO of Kidder’s parent firm GE, to go on television and banter with Conan O’Brien about the appliance industry. After Bob Citron lost all that money in Orange County, nobody asked him to go on “Letterman” and rap about his investment philosophy. After Apple Computer introduced one of its biggest duds of all time, no one asked John Sculley to appear on “The Late Show” and crack jokes. When people in ordinary businesses screw up-or when their underlings screw up-somebody has to face the music.

In the movies, it’s totally different. Lose a fortune making a movie like “Wyatt Earp,” the way Kevin Costner did recently? That’s OK: We’ll give you twice as much money to make a bomb like “Waterworld.”

It would be nice if just once, publicly traded companies in the movie business were subjected to the same withering scrutiny that companies in the defense, computer, or pharmaceutical industries face daily. Look at it this way: Many of us own stocks in mutual funds; those mutual funds own shares in movie studios; and those movie studios employ movie stars. Those actors, in effect, are assets or liabilities. So wouldn’t it be great if they were treated that way? I can think of nothing more exciting than attending a movie studio’s annual meeting and watching a bunch of disgruntled stockholders demand that management stop making money-losing films starring Madonna. What would be even neater would be seeing proxy statements sent out asking shareholders to vote on whether the studio should continue making moronic films with dimwits such as Pauly Shore.

But the best part of all would be seeing TV hosts take off the gloves. I’d like to see David Letterman brandish a P&L statement from Baldwin‘s last bomb and demand a reckoning.

“Alec, your last three films lost $30 million,” Letterman could say. “And I had shares in the studios that produced them. In other words, you’re costing me money. So if you ever want to be invited back on this show, your next movie’d better be a hit.”

“Don’t you want to talk about the alarming rise of parrot smuggling in the Amazon?” Baldwin might ask.

“The hell with that,” Letterman would fire back. “You get yourself into a hit soon, or we’ll do a Top 10 List of why nobody takes people like Alec Baldwin seriously. And believe me, pal, being married to someone named Kim doesn’t help.”


Joe Queenan is a regular conrtibutor on business issues, corporate culture and financial follies to Barron’s and The Wall Street Journal

About Joe Queenan

Joe Queenan is a regular contributor on business issues, corporate culture, and financial follies to Barron's and The Wall Street Journal.