Sony email shareholders would like to see

By Rob Cox
December 17, 2014

By Rob Cox

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

The hacking scandal at Sony’s Hollywood studio isn’t just embarrassing. It’s a business problem for the $23 billion Japanese conglomerate already struggling to turn itself around. Herewith, a selection of internal messages Sony’s board and executives ought to be fielding this week.

  • From: Osamu Nagayama, Sony chairman
  • To: Kazuo Hirai, Sony chief executive
  • CC: Board of Directors

Hirai-san, thank you for your latest update on the situation at SPE (Sony Pictures Entertainment). The $100 million estimate for immediate cleanup and repair sounds reasonable, considering the gravity of the breach. But I must reiterate the concern made by members of the board over the long-term costs to the franchise stemming from the release of some of the senior executives’ more damaging comments. A status report on how the studio can repair relations with talent and distributors should be presented at next week’s emergency session.

  • From: Joichi Ito, Sony director
  • To: Osamu Nagayama

Nagayama-san, do you really think there is any way that once all of these SPE emails have been made public the current management team can continue in their roles? At the very least, Amy Pascal (Sony Pictures Entertainment co-chair) will have to go. She has now angered every single bankable star in Hollywood – except maybe Channing Tatum and that chubby, funny guy from “21 Jump Street.” I know I am just a professor and venture capitalist all the way out here in Massachusetts, but even I can see that Angelina Jolie is the kind of person who holds a grudge! Plus, what’s wrong with Adam Sandler? He’s hilarious.

  • From: Osamu Nagayama
  • To: Joichi Ito

Ito-san, I hope you are not calling Amy a “minimally talented spoiled” executive? JK! But seriously, I share your concern. Her role is untenable even in a bitchy town like LA. Ditto for Michael (Lynton, Sony Entertainment chief executive). There will clearly have to be some accountability on this matter. So much face has been lost. There is already a search being prepared for replacements for both positions – though we may just want to merge the roles. It’s really just an ego thing to have two figureheads running the show. By the way, this would never happen in Japan – they would have bowed out by now.

  • From: Joichi Ito
  • To: Osamu Nagayama

Actually, this wouldn’t happen at any of the companies where I have invested – not even Twitter, and those guys were like feuding ferrets in a sack. OK, maybe this could happen at the New York Times, where I am also a director and the family really doesn’t have to worry about shareholders. But not in most normal companies.

  • From: Kazuo Hirai
  • To: Osamu Nagayama
  • CC: Board of Directors

Nagayama-san, as requested, I have asked Steven Kober (Sony Corporation of America chief financial officer) to prepare best- and worst-case scenarios for the long-term financial impact the current situation might have on SPE. As you know, when I was appointed to this job in 2012, I made revitalizing the electronics business my highest priority, and we have since executed many initiatives. Yet, while the entertainment and financial services businesses posted results that exceeded projections last year, I am extremely disappointed that we have not been able to complete our electronics turnaround. In particular, I take very seriously the net loss we have recorded for two successive years, and I deeply regret being unable to meet the expectations of our stakeholders, especially shareholders. So, as I said from the instant this breach was discovered, I take full responsibility and am prepared to face the consequences. Gomen’nasai.

  • From: Osamu Nagayama
  • To: Kazuo Hirai
  • CC: Board of Directors

Hirai-san, the board believes it premature for you to consider any moves beyond fixing the current problems. While we are aware this will divert much of your attention in the short run, the board is supportive of your plan to restore profitability and get us back in a situation to resume paying dividends.

  • From: John Roos, Sony director
  • To: Osamu Nagayama

Osamu, I would be happy to lead a search committee for the board.

  • To: Sony Board of Directors
  • From: Daniel Loeb, Third Point chief executive

Dear Kazuo and the board. I bet you wish you’d listened to me! But seriously, though Third Point exited most of its position in Sony, we are still willing to consider an underwritten spinoff of the entertainment and music units. As I wrote in October, more urgency will be necessary to turn around the company. Well, here’s your moment to act.

P.S. Don’t email me, use the telephone.

  • From: Osamu Nagayama
  • To: Board of Directors

You have all seen Dan Loeb’s note regarding his willingness to fund a spinoff of the entertainment businesses. Unless any of you disagree, it is premature to consider any such action until after the current SPE problem is sorted. I will tell him that by phone. Which reminds me, there’s no chance these emails are being read, is there?

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