JUST ANOTHER DAY IN THE RACETRACK EXECUTIVE SUITE

If you have ever worked in the world of publicly traded corporations, you will recognize the jockeying that just culminated at Churchill Downs, Inc. (CDI) with the abolishment of the company’s entertainment division (CDE) and the upcoming departure of the division’s president, Steven P. Sexton. This is a typical corporate scenario that plays out in countless companies and ends with such sugar coated exit templates as “I am leaving to pursue other interests” or “to spend more time with my family” and “We thank (fill in the blank) for his/her service and wish him/her all the best.”

Mr. Sexton started his career in racing as a sales promotion manager under the tutelage of the former renowned racetrack marketer Alan Balch at Santa Anita Park. His career took him to Canterbury Park, Golden Gates Field, Thistledown, Lone Star Park, Arlington Park, and Churchill Downs. Like any executive, Mr. Sexton made decisions over the years that angered some people, but overall his reputation has been one of a bright and capable racetrack manager on the way up. His rapid ascendency in the racing industry corroborates this evaluation.

Following is the timeline for Mr. Sexton’s tenure at CDI.

May 2001. Mr. Sexton resigned from Lone Star Park–where he had been a key player in its start-up stage—to become executive vice president of CDI’s Arlington Park in Chicago. Three months later, he was elevated to track president. In his continued rocket-like rise within CDI, in late 2002, he was named senior vice president of CDI’s Kentucky operations and president of two racetracks, Churchill Downs and Ellis Park.

July 2005. William C. Carstanjen, a racing outsider—an attorney from General Electric–was hired by CDI as executive vice president and chief development officer. Mr. Carstanjen quickly emerged as a competitor for Mr. Sexton for further promotion into the upper corporate ranks.

July 2006. Thomas Meeker, who hired both Mr. Sexton and Mr. Carstanjen, retired as CDI company president and CEO. He was replaced by Robert L. Evans, who still holds these positions. Mr. Evans had hard-to-find qualifications: an in-depth understanding of both the racing industry and high-technology business strategy.

January 2009. Mr. Carstanjen was named chief operating officer of CDI. This made him the highest ranking executive next to Mr. Evans. (Carl Pollard, the CDI chairman, is a non-executive chairman.) Clearly, the decision had been made as to who was the heir-apparent to Mr. Evans.

Not being privy to the thinking of Mr. Evans, the best estimate is that he created a position for Mr. Sexton instead of terminating his employment when Mr. Carstanjen was designated as COO. Mr. Sexton was given the title of president and chief executive officer of a brand-new CDI subsidiary, an entertainment division that would conceive and offer concerts and other events. This evidently was an effort to diversify CDI’s lines of business. In fact, the CDI press release referred to a revised strategic plan.

Mr. Evans said: “Our changes here…are about aligning the right leaders at CDI with the strategic growth opportunities we believe exist…Steve (Sexton) is uniquely qualified to take on this important new senior leadership role. He has managed six runnings of the Kentucky Derby and Kentucky Oaks, Breeders’ Cups at Arlington Park and Churchill Downs, concerts by The Rolling Stones and The Police, plus a myriad of other major racing and entertainment events.”

July 2010. The CDI entertainment division held concerts over a three-day period under the umbrella of HullabaLou. They took place in unusually hot conditions with heat indexes in excess of 105 degrees. Although approximately 80,000 people attended, HullabaLou reportedly lost about $5 million.

October. 2010. CDI announced that it was dissolving the entertainment division and that Mr. Sexton would be leaving the company in November 2010. Mr. Sexton said “I am looking forward to expanding my career in a new direction.” Mr. Evans commented: “It has become clear that launching new, upscale entertainment events in the current economy, particularly with the persistently high levels of unemployment, is extremely difficult. While we received exceptionally high marks from the nearly 80,000 people who attended our CDE events, we fell short of the attendance levels necessary to operate these events profitably. I would like to thank Steve (Sexton) for his many contributions to CDI’s success.”

While such maneuvers are not at all unusual in the culture of corporate America, it is perplexing that CDI abolished the entertainment division after one failed effort under extenuating circumstances. The vast majority of start-up ventures take time to become profitable. Nonetheless, CDI decided to cut its losses, as well as Mr. Sexton’s remuneration–Forbes listed Mr. Sexton’s total CDI compensation for 2009 at $500,474.

Whenever a major corporate initiative does not live up to expectations, the executive in direct charge almost always takes the hit, while his or her boss or bosses go unscathed. In this instance that was exactly what occurred. Several hours after the announcement that the entertainment division would be eliminated and Mr. Sexton would be leaving, another CDI press release revealed that the CDI board had given Mr. Evans a contract extension. Like Bill Gates has commented, “Life is not fair–get used to it”–which is sage advice for anyone employed in the executive ranks of a public company.

Mr. Sexton perhaps lost out to Mr. Carstanjen because Mr. Evans and the board of directors decided to select an executive with a non-racing background to assist in diversifying CDI. The conglomerate General Electric in Mr. Carstanjen’s past was likely viewed to be more appropriate to CDI’s planned diversification efforts than was the racetrack-centric resume of Mr. Sexton.

Look for a talented and personable 50-year-old executive like Mr. Sexton to surface soon at another racing company. Only time will tell whether the CDI choice of Mr. Carstanjen over Mr. Sexton will prove to be correct.

Just as I was finishing this article, I saw a headline: “Executives Resign Posts at Mountaineer Parent.” Then another announcement came along—“Roy Arnold Resigns as Arlington Park President.” One of New York Yankees legend Yogi Berra’s malapropisms sprang to mind: “It’s déjà vu all over again.”

Copyright © 2010 Horse Racing Business

Comments

  1. The revolving door of racetrack executives has been a real problem From Magna to the NYRA and even in NJ, there is a lack of commitment to one’s salaried position.

    Until good people are hired to run horse racing for the long haul there is going to be little progress at the racetrack. Instead we are seeing “gaming people” at the helm at the expense of horse people. Not a positive development.

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