Bloomberg News

Blankfein to Dimon Laud NBA’s Elevator Intimidator Stern on Exit

January 20, 2014

National Basketball Association Commissioner David Stern

David Stern, commissioner of the National Basketball Association (NBA). Stern replaced and during his three decades in the top job he steered the NBA from tape-delayed telecasts of its title series to a sports, entertainment and marketing juggernaut. Photographer: Michael Nagle/Bloomberg

Anxiety grips National Basketball Association employees whenever the elevator stops on 15, home to the corner office of Commissioner David Stern.

“I often remark that people seem afraid to get on elevators with me -- and I’m not like David at all,” Robert Iger, chief executive officer of the Walt Disney Co (DIS:US)., said in a telephone interview.

Iger, Lloyd Blankfein, CEO of Goldman Sachs Group Inc (GS:US)., Jamie Dimon, CEO of JPMorgan Chase & Co (JPM:US). and Eric Schmidt, chairman of Google (GOOG:US) Inc., are among the business leaders who laud the methods and accomplishments of Stern, 71, who is stepping down on Feb. 1, 30 years to the day after he assumed the top job at a drug-filled league whose players were considered too urban for mass appeal.

“Here’s a guy who did this during bull times, bear times, culturally difficult times,” Blankfein said of Stern, who’ll be succeeded by his deputy, 51-year-old Adam Silver. “He’s not just a great CEO, but the perfect guy for that opportunity at that moment.”

An elevator ride with Stern, employees say, is akin to mental gymnastics. A micromanager with a penchant for venting frustration and anger, Stern rarely let pass an opportunity to test the preparedness of subordinates, said Jeff Mishkin, who spent seven years as the NBA’s chief legal officer, leaving in 1999 to become a partner at Skadden Arps Slate Meagher (1112L:US) & Flom in New York.

“With David, there was a sense that you had to be prepared every second of the day -- and never knew for exactly what,” Mishkin said. “If you were underprepared, or you underperformed, you didn’t last very long.”

Tape Delays

Stern replaced Larry O’Brien, for whom the championship trophy is named, and during his three decades in the top job he steered the NBA from tape-delayed telecasts of its title series to a sports, entertainment and marketing juggernaut that generates $5.5 billion in annual revenue behind iconic, one-name stars like Magic, Michael and LeBron. Annual revenue was $164 million when he took over with visions of a global enterprise that would become a model for diversity and social responsibility.

One of Stern’s core management tenets, according to Heidi Ueberroth, a former president of NBA International, centers on the belief that no detail is too small.

Ueberroth recalled a mid-1990s scuba diving trip to Belize over the Thanksgiving holiday when there was a scheduling mixup back in New York with broadcast partners. The ship’s captain was waiting for her to surface. “He said that someone named David Stern had attempted to reach me via the coast guard’s ship-to-shore radio,” said Ueberroth, who left the league two months ago after 20 years. “I discovered that with David there was literally nowhere to hide.”

A Myth

Stern, meantime, said tales of his micromanagement are a myth and his temper, which former Deputy Commissioner Russ Granik called his former boss’s biggest weakness, an affectation.

“I love to test ideas, issues, solutions -- and push,” Stern said in an interview. “And I like people that push with me and against me because we get to a better result.”

Subordinates weren’t the only ones to receive Stern’s ire, which, the commissioner’s assertion aside, wasn’t always an act, say Iger and billionaire Micky Arison, owner of the two-time defending NBA champion Miami Heat.

“It’s not beyond him to call the CEO of the Walt Disney Company to complain about something ESPN has done,” said Iger, whose ABC and ESPN networks are NBA broadcast partners. “He’s certainly not afraid to say what’s on his mind -- to anyone.”

Tampering Tale

Shortly after Arison, chairman of Carnival Corp (CCL:US)., took control of the Heat in 1995, he was accused by the New York Knicks of tampering during his team’s pursuit of team President Pat Riley. Arison, who got an earful from the commissioner, said it’s “absolutely fair” to say that Stern used fear and intimidation to get what he wanted.

“He was all over me, screaming and yelling. David was the judge and jury -- and the prosecutor,” Arison said. “When I first bought the team, my impression was that there’s 30 owners and David worked for 30 owners. What I quickly found out is there are 30 owners who worked for David.”

Blankfein and Dimon say they marvel at how Stern not only controlled, but cajoled and steered an ownership group composed of stubborn individuals accustomed to getting what they want.

“His style is designed to give everybody what they need,” said Blankfein, who at Stern’s invitation in October offered advice to NBA owners on domestic and international affairs as well as ideas on how to best run a business. “He does a very good arbitrage in that I don’t think he’s compelled to appropriate ego for himself, and therefore he can give it to other people who value it more.”

Respecting Opinions

James Dolan, chairman of Madison Square Garden Co (MSG:US). and owner of the New York Knicks, said Stern’s success with owners stemmed from him striving to make everyone feel their opinion was respected. “That’s key to keeping the group together,” Dolan said.

National Hockey League Commissioner Gary Bettman, a former NBA attorney, doesn’t buy that his former boss could bully his way to success, particularly as it pertains to owners that include the likes of outspoken billionaires such as Mark Cuban, whom Stern has fined many times and millions of dollars for publicly criticizing referees, among other violations.

“I don’t think fear-mongering does it,” Bettman said. “David’s greatest skill is his ability to be creative and find the most common ground.”

Stern delivered for owners and players, whose average salary rose to more than $5 million from about $250,000 when he took over.

More Teams

The NBA added seven franchises and increased revenue 30-fold during Stern’s time in charge of a league that now shows its games in 215 countries and territories, up from fewer than 10 in 1984. Additionally, television revenue rose 40-fold to about $930 million annually -- a number that might at least double in the next round of already-started negotiations. The NBA under Stern became the first of the North American sports leagues to put its footprint in China, ultimately establishing a business unit in the world’s most populous nation.

“He took them global,” said Dimon, whom Stern invited to address the owners during their annual meeting in 2009. The commissioner’s willingness to not only embrace an outsider, but seek his counsel, speaks to him as a leader, Dimon said.

“For him to invite me to talk to the owners, and have a completely open conversation -- the good, the bad, the ugly -- a lot of people certainly wouldn’t do something like that,” said Dimon, a Knicks fan.

Meeting Bankers

Stern has been a regular guest at the largest U.S. bank’s CEO conferences, Dimon said. “He comes to both learn and listen,” he said.

Stern has also attended Allen & Co.’s annual media and technology conference in Sun Valley, Idaho.

Steve Greenberg, an Allen & Co. managing director focusing on sports and media, attended NBA All-Star weekend during the mid-1990s. At the time, Classic Sports Network, which he co-founded, was one of hundreds of NBA licensees. “Not big shots,” said Greenberg.

Nonetheless, when he chatted with Stern, the commissioner knew exactly where he was seated for the game.

“He, as commissioner, had done the seating for 5,000 people, personally reviewing who was where,” Greenberg said. “That goes above and beyond what the normal CEO would do. There was not one detail of any business transaction that David wasn’t the most conversant one in the room.”

Stern said the number was more like 200.

Running Everything

Says Dolan, the Knicks’ owner, “David’s got his fingers in every aspect of the NBA. Literally, there’s nothing that goes on he doesn’t know about. He pretty much orchestrates it all.”

Not true, says Stern. At least not anymore.

Stern agreed that he had a hand in every decision during the early days of his tenure, from hiring and office decor to whether a second line of chafing dishes was needed during meetings with business partners.

“When you have television in over 200 countries and you’re streaming games around the world and you’re running three leagues and you’ve got a website and a TV network and you’ve surrounded yourself with people who are more competent than you are, you’d have to be stupid to micromanage, even if you could, and you couldn’t,” he said.

Stern today isn’t much different from Stern two decades ago, said Ueberroth, whose father, Peter, is a former Major League Baseball commissioner.

Omnipresent Commissioner

At her going-away party, Ueberroth said she and Stern shared a few chuckles over his tendency to start questions with “Did you know that” or “What can you tell me about.”

Ueberroth recalled as an NBA neophyte the anxiety that accompanied seeing Stern’s telephone number on her beeper. Technology made it worse.

“Now he’s lit up 24/7 on e-mail,” she said. “David never allowed anything or anyone to get complacent.”

While others are looking back, Stern’s longtime lieutenant says his former boss’s greatest strength is his ability to look ahead.

Granik, who spent 30 years at the NBA, taking over as deputy commissioner in 1990, said Stern was the first to recognize how a sports league could reap the benefits of a close relationship between sponsors and broadcasters.

“He was particularly good at seeing where the business could grow and how it could grow,” said Granik, a member of the Hall of Fame who spearheaded the effort to have NBA players compete in the Olympics.

Two Negotiations

Mark Lazarus, who previously presided over Turner Sports, recalled contract renewal talks with Stern when ESPN was negotiating for rights held at the time by NBC. Stern allowed Turner to negotiate side-by-side agreements -- one based on NBC retaining its rights and another with ESPN, a cable competitor to Turner, winning them.

“In terms of a former lawyer being creative, I don’t know that there’s a better one,” said Lazarus, now chairman of the NBC Sports Group. “He instilled in me a philosophy of partnership and how to treat partners because it was a long-term view.”

Stern was always thinking five years ahead, said Magic Johnson, whose on-court rivalry with fellow Hall-of-Famer Larry Bird, followed by the emergence of five-time Most Valuable Player Michael Jordan, fueled the league’s popularity.

Johnson called Stern, the competitor and businessman, an amalgam of himself, Bird, Jordan, Kobe Bryant and LeBron James, a quintet with a collective 16 MVPs and 21 championships.

Stern’s Vision

“He wanted to win. You only want to be on his good side,” said Johnson, a former limited partner with the Los Angeles Lakers, the franchise he led to five titles as a player. “The reason the NBA was able to grow the way it did was because of his vision.”

His idea for global domination prompted him to bring in New York Times columnist Thomas Friedman, author of the book “The World Is Flat,” to talk with owners about a basketball world without borders. Stern was dubbed “Digital Dave” in the halls of the league’s Olympic Tower headquarters because he preached using technology to create new customers across the globe.

Stern has presided since 2000 over what the league calls a Technology Summit during All-Star weekend, drawing the likes of Schmidt, who in an e-mail said Stern was one of the first to seek YouTube and other Google distribution for NBA content.

“He simply does it himself, and calls you,” Schmidt said. “A true businessman who makes the market happen.”

Entertainment Leader

Schmidt, like almost everyone asked about the commissioner’s management, cited Stern’s sense of humor as a key driver of his success. “His style is very disarming. He is always first to say hello anywhere and runs over, and always says something both perceptive and fun,” he said. “He exemplifies what a leader of an entertainment group should be doing.”

Stern wasn’t infallible.

Richard Peddie, the former CEO of Maple Leaf Sports & Entertainment, which operates basketball’s Toronto Raptors, said Stern wasn’t quick enough to fix money-losing endeavors like the NBA Store on Fifth Avenue in Manhattan, which eventually moved to a smaller venue, and the Women’s NBA, which even the commissioner says expanded too quickly. “David was slow to admit his mistakes,” Peddie said, adding that some owners, including Cuban and Dolan, pressed repeatedly for increased financial transparency.

Cuban didn’t respond to e-mails seeking comment on Stern, though he has said they’re friends and often agree on business matters.

Excessive Exuberance

Stern agrees with that evaluation, saying like many chief executives he occasionally stayed with an idea too long.

“Sometimes you get carried away with the exuberance of your own emotional desires, and that’s not a great thing,” he said.

Keith Murnighan, the Harold J. Hines Distinguished Professor of Management and Organization at Northwestern University’s Kellogg School of Management, compared Stern’s success to that of Steve Jobs, the co-founder of Apple Inc. (APPL:US) who died in 2011.

“All of us have this tendency to micromanage more than we should,” said Murnighan, who has followed the commissioner’s career. “Maybe he takes it a step above the average.”

League Diversity

Stern was a decade ahead on the need for, and benefits of, diversity at the league and team level, said Richard Lapchick, founder and director of the Institute for Diversity and Ethics in Sports at the University of Central Florida.

“A long, long time ago David said to me one of the most profound lines on diversity and inclusion: He said, ‘I want there to be a time when nobody notices when we hire a black coach and, more importantly, when we fire a black coach.’”

Stern last year was among those awarded the W.E.B. Du Bois medal in recognition of his service to African-American culture. Of all his accomplishments, the commissioner said he’s most proud of the fact that “a league that was considered destined to fail because it was too black has its players atop the celebrity pyramid globally.”

Stern’s commitment to social responsibility was never more evident than in 1992, when over objections from players he encouraged Johnson’s participation in the All-Star game after the three-time MVP’s disclosure that he was HIV positive.

Social Change

“It was a bold move because HIV was still something you whispered about,” said Johnson, who was named the game’s MVP. “It went from the league to America to the world. It sent a clear message. He had the platform and he used it to elevate social change.”

As for the management change, Stern before his departure intends to have lunch with every employee who has been with the NBA for at least 10 years. In the New York and New Jersey offices alone that number tops 400.

“It’s almost an obligation of the CEO to engage with people on what they’re doing and to be interested in what they’re doing and to give them a sense that what they’re doing counts,” Stern said. “It’s important to let people know that they are making a contribution to the organization, what that contribution is and that the contribution is appreciated.”

Fearless Elevators

What jittery NBA employees will undoubtedly appreciate is Silver’s stance on elevator etiquette, which won’t resemble that of the soon-to-be former boss who’ll remain a consultant to the league with the title of commissioner emeritus.

“David always stressed the importance of being inquisitive. That trait -- and many others -- I learned under his tutelage,” Silver said. “Elevator inquisitions, however, were unique to David, and I’ve promised my colleagues that I’ll just look up at the row of floor numbers like everyone else.”

To contact the reporter on this story: Scott Soshnick in New York at ssoshnick@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net


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