Celebrity flameouts> are great for the tabloids, tell-all television and, in our digital age, YouTube. It seems no moment is too private to be recorded on someone's cell phone. But what do they mean for investors?
I was doubly dismayed by fashion designer John Galliano's recent anti-Semitic tirade in a Paris bar, quickly followed by the release of a video recording a similar rant in the same cafe several months earlier. Not being an expert on haute couture, I would have been hard pressed to identify Galliano before his recent and appalling notoriety. But until being fired March 1 for his ugly remarks, Galliano was the creative head of Christian Dior, the iconic fashion house owned by LVMH. And I'm an LVMH shareholder and have recommended the stock in this column several times.
I had a similar reaction to actor Charlie Sheen's bizarre public attack on Chuck Lorre, the executive producer of the hit CBS sitcom "Two and a Half Men," even though I'm not a shareholder of CBS (which airs the show) or Time Warner (whose Warner Bros. unit produces it). Sheen insisted on using a Hebrew version of the producer's name, giving his tirade an element of anti-Semitism. Production of the show was initially suspended, and then Sheen was fired from the sitcom this week after he participated in a series of outlandish TV appearances and generated a media circus.
In today's world, few people are just celebrities: They're also brands and often, as is the case in both of these examples, indelibly linked to publicly traded companies. (Recall the furor over the Tiger Woods scandal.)
I don't mean to minimize the nasty conduct at issue by focusing unduly on the business and investment impact. I find it deeply troubling that well into the 21st century, more than a half century after World War II, anti-Semitism is still raising its ugly head. I'd think it would have been eradicated in Paris and Hollywood, of all places, given the Nazi occupation of the former and the fact that the latter wouldn't exist as a film capital without the Jewish studio pioneers. But there it is, reminding everyone that the world will likely never be free from prejudice. To their credit, both LVMH and Warner Brothers moved quickly to condemn their stars' repellent behavior.
Galliano issued what seemed a heartfelt apology, pointing out that he himself had been a victim of discrimination (homophobia, presumably), saying he was seeking help for his "failures." (People close to Dior said the designer has been suffering from alcohol addiction.) He seems to have embarked on the well-worn path to redemption already traced by such stars as Mel Gibson, who apologized and sought treatment for alcoholism after an anti-Semitic outburst in 2006. Sheen, who filed a $100 million suit this week against Warner Bros. and Lorre, has so far shown no evidence of contrition.
Contrition or lack thereof aside, their respective contributions to LVMH, CBS and Warner Brothers are over for now. And so far, their departures have had little impact on shares. LVMH's American depositary receipts (LVMUY)
The question for investors is whether a top fashion designer and leading Hollywood star, however talented, are truly irreplaceable. And I think the answer is: They're not.
Christian Dior is long dead, and a succession of designers has nonetheless burnished Dior into a coveted global brand. Can anyone outside the fashion industry even remember the names of any of these people? LVMH chief executive Bernard Arnault had bigger issues in mind this week as he announced the acquisition of luxury jeweler Bulgari, another iconic brand.
Similarly, hit television shows come and go. Whether "Two and a Half Men" can continue without Sheen is beside the point. CBS is capable of generating another hit, preferably starring someone a little more stable.
More broadly, the Galliano and Sheen episodes pose the question of whether anyone in business is irreplaceable. Martha Stewart? The company survived her imprisonment for false statements. Steve Jobs? The Apple founder seems to have done a good job of grooming managers who can function in his absence.
Everyone is unique, and some are more talented than others. But generally speaking, I don't think anyone is irreplaceable. I've never made an investment decision simply because someone resigns, is fired or dies. Investors usually don't like change, but replacements for Galliano and Sheen may even be better for the companies that employed them. The human race is endlessly regenerative, and talent, thank goodness, is in ample supply.