Wynn Resorts

Annual meeting: April 21, 2017

One of our most overpaid CEOs from As You Sow’s list last year just got a big raise. Stephen Wynn’s total compensation increased from $20 million to $28 million. His stock award and non-equity incentive compensation increased by an even $4 million each from 2015 to 2016.

Wynn Resorts has been on our list for three years. The CEO is paid more than peers. The pay is out of proportion to the value delivered: HIP Investor’s regression analysis found that he was paid an excess of nearly $9 million in 2015. (See our report for details). Since shareholders last voted on this pay package in 2014, the board has reduced the CEO’s salary — though it remains among the highest for S&P 500 companies — but continues to award large incentive payments and excessive perquisites

Wynn’s 2016 total incentive compensation is $25 million – divided between cash and stock – the maximum allowed by the plan. There were three performance criteria: 2016 Adjusted Property EBITDA, (b) Forbes Five-Star distinction for specific properties, (c) Wynn Palace opening on or before December 31, 2016. It is unclear whether these criteria, particularly the latter two, are in shareholders’ long term best interests. In setting such criteria, the board focuses the executives on meeting it at any cost, and there reports  hint at long-term issues with investment in Macau.  Indeed, the company’s own 10k lists one of its risk factors as: “Visitation to Macau may decline due to economic disruptions in mainland China, restrictions on visitations to Macau from citizens of mainland China and the anti-corruption campaign.”

Shareholders have seen value decline over the past five years. While a heading in the proxy statement titled “Long-Term Total Stockholder Return Performance Remains Strong” it is followed by a chart that shows only the performance of the last year. Indeed, the stock trades at less than half of what it traded for in February 2014.

Insulated from shareholders

We have found that the most overpaid CEOs are often insulated from shareholder votes in a number of different ways, and Wynn Resorts falls into that category. There is a large insider ownership stake: Stephen Wynn owns 11.8% of the shares and Elaine Wynn owns another 9.4%. I wrote about Elaine Wynn, the twice-married, twice divorced, co-founder of the hotel and her attempts to get renominated to the board in 2015.

Vanguard holds 7.6% of the company; likely primarily due to indexed funds. According to one recent article  “In 2016, investors pulled more than $380 billion from actively managed mutual funds while pouring almost $480 billion in passive investments.” Traditionally, such passive investments have not been diligent in voting against compensation packages.

Finally, Wynn Resorts allows shareholders to vote on pay only once every three years. The company claims this triennial vote is “the appropriate time frame for the Compensation Committee and the Board of Directors to evaluate the results of the most recent advisory Say-on-Pay vote, to develop and implement any adjustments to our executive compensation programs that may be appropriate in light of a past advisory vote on executive compensation.”

Directors at all but a handful of companies in the S&P 500 have shown themselves capable of annual evaluations not just of votes, but of compensation practices. Shareholders would be advised to support an annual vote on pay.