Chamber of Horrors?
By Ron Donoho
Casey Stengel was talking about baseball when he observed, “The secret of managing is to keep the five guys who hate you away from the guys who are undecided.” Permit the liberty of applying the former New York Yankee skipper’s logic to recent events engulfing management of the Greater San Diego Chamber of Commerce.
Nobody hates Ben Haddad. Quite the contrary. An affable policy wonk who toiled as a top aide to both San Diego Mayor Susan Golding and California Governor Pete Wilson, Haddad never had to worry much about enemies. Former coworkers describe him as a calm, unruffled professional—someone who’s ethical, straightforward and not prone to speak ill of any friend, foe or acquaintance. What’s to hate?
But when Haddad was hired as president and CEO of the Chamber of Commerce last July, he inherited opposition. Several knowledgeable sources say Haddad couldn’t keep at least one detractor away from six people with the power to give him the boot.
When Gil Partida resigned as chamber president in January 1998, Lynelle Berkey became interim president. She’d been groomed as Partida’s successor. But the chamber’s board of directors wanted a “name” in the post. Someone with political clout.
In a story that ran May 28, 1998, in The San Diego Union-Tribune, then–chamber chair Anne Evans was quoted as saying: “Ben has a wealth of experience in getting things done in San Diego, in Sacramento and in Washington. Many of San Diego’s micro-issues are settled in the Capitol. His political acumen will be of inestimable value. He knows our issues through and through.”
With Haddad at the helm, Berkey became chief operating officer. But even at the number-two position, Berkey reportedly held more sway with ranking board members. According to one source, “If there had been a good relationship between Lynelle and Ben, he never would have been fired. She really pursued a path of undermining Ben and destroying his credibility.”
Tom Creamer agrees. “Lynelle Berkey set Ben Haddad up for failure,” he says. In 1993, as a senior vice president for Shearson Lehman Brothers, Creamer served on the chamber’s board. From 1994 to 1998, Creamer was a full-time chamber staffer, serving as special assistant to the president and specializing in membership sales and retention. He was fired by Berkey in May 1998. Creamer, 67, says he is preparing to bring an age-discrimination lawsuit against the chamber. (A chamber spokesperson declined comment on a possible lawsuit.)
“They had an $8 million budget for 1998,” says Creamer. “There’s no way they could have done that—it was an insane budget. Their budget for [membership] upgrades was $150,000. I know the market, and they would have been lucky to do $15,000 [in upgrades].”
Berkey resigned in early November and moved to Henderson, Nevada, where she works in real estate development with her husband, George. “I absolutely did not undermine Ben, and it pains me to even have to discuss that subject,” she says. “There was a good blend between the two of us.” Two board members alleged to have been swayed by Berkey’s reports also deny she influenced their decision to fire Haddad.
Haddad declined to comment on the circumstances surrounding his forced resignation.
In December—as has now been highly publicized—a maverick subset of the 26-member executive board violated chamber bylaws and told Haddad his services were no longer needed. According to Evans, who’s chairman of Evans Hotels, she was joined in this task by current chamber chairman Brian Seltzer, partner at the law firm of Seltzer Caplan Wilkins & McMahon; Steve Cushman, president of Cush Automotive; Bill Roper, senior vice president of SAIC; Regina Petty, partner at the Wilson Petty Dunwoody & Turner law firm; and Joe Craver, president of Galaxie Management.
Haddad’s lack of financial acumen has often been cited as the reason for his dismissal. Culled from several sources, previously unreported specifics include:
* A decision to pay a $30,000 advance to hire a private fund-raiser to bring in out-of-town sponsors for Fleet Week activities. (Some board members felt it was a waste of money. Others say it wasn’t Haddad’s idea.)
* Haddad’s decision, when it became obvious that money wasn’t available for bonuses, to give the chamber staff a week of vacation between Christmas and New Year’s Day. It was done without board approval.
* An inability to find a private jet to fly Bob Dole to the Bahamas after his appearance at the Insights event. Dole was paid $25,000 to address the chamber-sponsored symposium. His contract called for the private aircraft. Nobody could get the use of a personal plane to be donated. A private charter cost the chamber an additional $26,000.
The news that Haddad was sent packing dropped the chamber into a maelstrom of controversy. Some executive committee members didn’t like being left out of the loop. And companies like Solar Turbines and Sammy’s California Woodfired Pizza resigned their memberships specifically because of the way Haddad was let go. Cubic Corporation and Bank of Commerce dropped out, and there is uneasiness about the status of Qualcomm, which had rejoined just after Haddad came on board. A Qualcomm spokesperson says the mega-corporation paid membership dues for a year, and has no comment on whether it will re-up when the year expires.
The chamber’s image also took hits on other fronts. Membership reportedly peaked around 4,500 during Partida’s tenure (Evans questions that number), and a chamber spokesperson says membership is now down to about 3,900 (Partida, now CEO of PriceSmart Inc., believes the current figure is lower).
On top of declining membership, the 1998 Insights lost about a quarter of a million dollars. It has been cancelled this year but will reportedly be held again in the spring of 2000.
The nonprofit chamber has been swimming in red ink. Its 1997 books—just recently closed—saw a loss of $263,000. That figure includes a $190,000 loss incurred by the chamber’s foundation. And for 1998, two $250,000 bank loans were taken out, in part to help meet payroll.
A week after Haddad was pushed out, chamber officials admitted state and federal laws were violated in 1996, when $12,000 was donated to San Diego School Board candidates through the chamber’s political action committee. The matter is being investigated by the state Fair Political Practices Commission.
The public relations nightmare turned bizarre when a story that ran in The Daily Transcript—a freelance op/ed missive that lauded the benefits of chamber membership—was exposed as a fake.
Red ink, campaign finance laws and pseudonymous newspaper stories aside, the blunder that got everyone’s attention was Haddad’s untimely exit. For that, varying degrees of guilt have been assessed among the so-called “Gang of Six” board members.
Judge for yourself: Craver, in line to succeed Seltzer as chamber chair in 2000, says he wasn’t an initiator. “The decision was made by the chair at that time [Evans] and the incoming chair [Seltzer],” says Craver. “I was not in on the decision-making part of that, and I don’t think anybody else was. There were people who knew—and I was one of them—that there was a lack of confidence indicated in Ben. For the media to say that a group of people did this is totally false. It’s not that we didn’t know about it. But that decision can only be made by the chair.”
But Evans says it was a group decision. “I’m a very private-sector person. In the private sector, when a mismatch occurs it’s important to act promptly. So we went to Ben and offered him the opportunity to choose his exit music. At that point, this was very closely held information. We wanted him to have privacy and be able to protect his reputation.”
Evans says the group of six kept it to themselves because “Would anybody want to have to deal with this type of thing in front of [the full executive board contingent of] 26 people? But it was the six of us who came to the conclusion that Ben Haddad was a mismatch, that it was a hiring mistake.”
Roper agrees it was a group decision. But he says the group was larger than six. “There were about 10 people involved in this decision,” he says. “No, it wasn’t the full executive committee—and that was a mistake. But the number of people involved was larger than six.” Roper wouldn’t name others allegedly in on the plan.
Roper confirms Berkey was “one of several people considered” to take over the chamber after Haddad was fired. Berkey says she was “honored to be considered.” But sources say the full executive committee nixed the idea of bringing her back. Roper and Cushman dismiss the notion that Berkey conspired with them to come back.
Says Cushman: “She’s very bright and hard-working and a dedicated and caring lady.” He declined to comment on any specifics of Haddad’s firing or “private conversations I was part of.”
But Cushman is adamant about one thing. “We need to move on now,” he says. “I believe the chamber to be an excellent organization. It works very hard on behalf of the business community. It provides top-level advocacy and benefits. This 129-year-old organization is alive and well.”
Most would agree the chamber is alive. But is it well? That question, in varying forms, was put to about half of the chamber’s full 94-person board contingent, as well as prominent members of San Diego’s business community.
The lockstep manner in which almost all board members echo Cushman’s call to focus on the future is both monotonous and fascinating. Even executive committee members who were reportedly furious about Haddad’s ouster are now trying to put the incident in the past.
“It’s true that a lot of us felt strongly about the situation with Ben, and I was vociferous about how the process was handled,” says Bill Geppert, vice president and general manager of Cox Communications. “I think we learned from this. We’re a better chamber when we listen and hear divergent viewpoints.”
Ted Roth, president of Alliance Pharmaceutical Corporation, believes the media ought to stop dwelling on the story. “We made mistakes,” he says. “We had a lot of scrutiny. There has been publicity I would have preferred not to have to deal with. Some people were upset. Some companies dropped membership. But this will make us better. Watch us, and don’t get hung up on the past. We can’t allow a single event to ruin the chamber.”
Adds Seltzer: “There are areas we can improve—like financial controls and membership retention. But please, judge us by results and give us time to evolve.”
Jack McGrory is one who was initially upset with the evolution. The former San Diego city manager and current CEO of Price Enterprises was invited to join the chamber’s executive committee. He accepted, but quit in response to the Haddad firing. Then he changed his mind and rejoined. “You can’t let a small group make the decisions,” says McGrory. “But I’ve been assured there will be a change in that style.”
Solar Turbines is not as convinced. “We withdrew membership and are waiting to see that they are working together and providing the kind of service we feel is beneficial from a chamber of commerce,” says Solar spokesperson Wendy Swanson.
Other business leaders outside the chamber are shaking their heads at the actions of the chamber.
“Ben Haddad’s firing was a large blow to the credibility of the chamber,” says Craig Irving, chairman of the Downtown Partnership and principal in The Irving Hughes Group. “It’s damaging when large corporations pull out. Yes, they’ll probably recover. I don’t mean this as a slam on Ben, but my dad always said, ‘Everybody is replaceable.’
“Of course, it’s easy for me to be critical of the people who fired Ben. Public opinion is that Ben got the shaft. That’s my opinion, too. But I don’t know all the facts. The people involved with this have to ask themselves why they’re involved with the chamber. Is it to serve San Diego? If their staying is doing damage, then they should step down,” says Irving. “But how do we know? There’s a code of silence that’s been signed onto about this. Were personal vendettas involved? I don’t know.
“There’s some crossover membership with the chamber and the Downtown Partnership. Downtown is the heart of the region, and we should be working together. We’d love to work together. It appeared Ben wanted to work with us,” Irving says.
Malin Burnham, chairman of the board of John Burnham & Company, is also puzzled by recent events. “I’m a complete outsider—I haven’t been involved with the chamber in 10 years,” he says. “The chamber is a positive force here. It’s a vital and necessary pro-business voice.
“But they never should have hired Haddad, or they never should have fired him. They made a mistake—the way they handled it was not in good taste. Because of the Haddad situation—and other situations—they have egg on their face,” says Burnham. “I’ve had egg on my face, and it always seems to wear off. This isn’t a downturn or an out-of-control or less effective chamber. They just danced a couple of dances not just right.”
Still, Burnham brings up the example of Salt Lake City Olympic Committee leadership, some of whom resigned when that group’s back-room dealings were brought to light. “That’s one way of doing it,” he says. “I’m not trying to draw a parallel to the skulduggery of the IOC. But that shows one solution is for the top to step aside.
“Undoubtedly, some valuable lessons were learned [by the chamber board]. I don’t think it’s too much of a risk to keep the board members. The top leaders are embarrassed,” says Burnham. “But the question is: Who is the real leadership? The executive president? The chairman of the board? I guess that depends on what is perceived by the board.”
Of the chamber board, former president Partida says this: “It’s too big. You can’t have 80 people [94 now] on a board. That’s crazy. I understand that when you’re fund-raising, a seat on the board is part of it. But it comes down to that the executive committee is really the board. And then there is always a smaller part of the executive committee that takes the lead. When I was president, Steve [Cushman] and Mel Katz and I got together on a weekly basis.”
Asked why he left the chamber presidency, Partida’s response is curious. “The job has a fair amount of prestige,” he says. “But I really didn’t want to get paid more than the $250,000 they were giving me. I know it’s weird to say that. But it’s easy to get comfortable in that job and not want to leave.”
Comfortable, he believes, if you’re a CEO with business smarts. “Being able to run a business and having political sensitivity are important—in that order,” says Partida. “A businessperson has to be in charge. Maybe, if the chamber really wanted Ben, it would have been a good idea to bring him in as a number-two at first.”
Though Partida has been praised for increasing membership during his reign at the chamber, some, including past chair Evans, have called the accounting procedures left over from his term “ragged” and “undecipherable.”
“I can’t really talk to that,” says Partida. “There certainly was a fair amount of brain drain—a number of people in accounting left the chamber. We could have had some gaps, sure. I was never called on anything. I wish I had been.”
There has indeed been a brain drain. The chamber saw 50 percent turnover in 1997, and 80 percent of the staff left in 1998. That means at least 44 of the 55-person staff has been at the chamber a year or less.
Tom Creamer says the tarnish on the image of “The House That Gil Built” is beginning to show. “You can’t play a shell game with the money forever,” he says. “At some point, the bills become due. There was a lot of robbing Peter to pay Paul. Like the rent deal cut with the Wyndham [where the chamber is headquartered]. They got a lot of savings up front, but that’s over.”
Haddad’s firing was a case of shooting the messenger who brought bad accounting news, says one chamber staffer. “I don’t think the whole board was upset by hearing how Insights really lost money, or other things like that. Some saw it as a breath of fresh air: Finally—the truth. But some people didn’t want to deal with the truth.”
Cushman in particular, says the staffer, was worried that an outing of bad accounting practices would reflect badly on him. Cushman was chairman of the chamber from 1996 to 1997. “The guy obsesses about the stupidest things,” the staffer says. “Let’s say bad things did happen. And the worst face is put on it. Who gives a shit who the chairman was at the time? He’s not really responsible. Who’s going to hold him responsible? All he has to say is ‘Oh, gosh, I wish I’d known.’”
On the other hand, Cushman—who is also an assistant to the mayor, a Port of San Diego commissioner and a convention center board member—did have an office in the chamber during his chairmanship and might well be deemed responsible for bad news brought forward by Haddad.
“I know the question of the finances of the chamber has been in question,” says Midge Costanza, a current board member, former aide to President Jimmy Carter and head of her own public-speaking-instruction company. “When people make reference to Gil Partida, keep in mind Gil Partida did nothing without the approval of the executive committee and the chair.”
So what now? A 12-person CEO selection committee is in place. Anne Evans says this time the committee will have a better idea of exactly what kind of candidate it’s looking for.
“When Ben Haddad was hired, the job description was incomplete,” she says. “Now, we have a much better job description to work from. We know more about the job. Chambers are different than they used to be, and require sophisticated management. The stereotypical view is that it’s a good-ol’-boys’ place. Well, this is not your daddy’s Pontiac anymore.”
Herb Klein, editor-in-chief of Copley Newspapers, is chairing the selection committee. In late February, Klein said the committee was still working on the job description, and he indicated the search would be national, not limited to San Diego.
The committee is working with San Diego headhunter Bob Watkins, of R.J. Watkins & Company, who placed Haddad at the chamber. “There will be less emphasis placed on ‘marquee value’ this time,” Watkins says. “The committee will spend more time determining the qualities they want, their expectations and on how the new person will be evaluated.”
Watkins hopes to interview a short list of four to six candidates by mid-April and to have a person in place by May. He expects the board to give more policy controls to itself, while centering the CEO’s duties on operations.
That would be a mistake, says Costanza. “The chamber board of directors shouldn’t set policy,” she says. “What we need is a strong president who will become the visible authority. That person should be allowed to administrate. I really believe we need a person who comes from San Diego and knows all the players.”
One name that keeps popping up as a candidate: Lawrence B. Prior III, San Diego County’s chief administrative officer. Watkins, who recruited Prior for the CAO job, says Prior is a “prospective candidate, like many others.”
Prior has been both praised and vilified for his efforts to privatize county government services. In January, San Diego Magazine chronicled Prior’s management style in a special report on Edgemoor Hospital, noting his sometime reluctance to work with the media.
“I’ve heard his name tossed around about the chamber job,” says Costanza. “I certainly suggest he be more accessible to the media. It’s important to let the media ask questions so we can get answers. But if his name were put before me, I would support his being named president.”
The chamber’s interim president, retired Bank of America vice chairman Jim Wiesler, says he’s working closely with the search committee. The 71-year-old Wiesler was dragged out of retirement to help stabilize the chamber, analyze what went wrong and set up internal control systems. He’s been in the job since January—and expects to be back on the golf course by summer.
“When I came in, I saw there was no business plan, no budget; the 1997 books had not been closed; and they were a year behind in getting an outside audit done,” says Wiesler. “There were no processes or controls in place. And if you don’t have controls, then you tend to overspend. I was surprised by this—and yes, I was disappointed. There really was a lack of sophistication here.” Wiesler says that assessment dates back through Partida’s term.
Wiesler will propose the chamber hire a CEO with a specialty in finance. He does not advocate hiring a new COO. Rather, he says, the CEO should be served by three senior vice presidents specializing in public policy (a post held by Michael Magee), economic bureau/publications (Bruce Cohen is on the job) and sales/marketing/events (interim COO Randy Johnson, hired in tandem with Wiesler, is serving in this capacity now).
A root cause of inefficiency is the chamber’s gigantic board, echoes Wiesler. He believes the full board should be cut from 94 to 30; the executive committee from 26 to nine.
“I was a banker. But I was also a manager. As a manager you’ve got to like people and listen to them and handle people problems,” he says. “The problems here are being addressed. We’re trying to develop credibility. What else can I say?”
John Hawkins, an executive committee member and president of Cloud 9 Shuttle, believes the chamber is moving in the right direction. “A lot of good has come from this change, especially how the board acts and thinks,” he says. “If the Chamber of Commerce in San Diego didn’t exist, we’d create it. And you know what? The same people in charge now would be leading it.
“But those people now are trying to be more proactive and inclusive. They’re actually showing some management style. Ben will have brought change to the table. He was the catalyst.”
He also was, some would say, the martyr.