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Gaming bigwigs occupy top three spots in Sweet 16 rankings of CEO pay6 May 2013
By Tim O'Reiley
After a year that saw the head of a pharmaceutical maker incongruously rise to the top of the last, the titans of the Strip dominate the top of the list in 2012.
But don’t feel sad for Rajesh Shrotriya of Spectrum Pharmaceuticals, a cancer drug maker that quietly shifted is headquarters from Southern California to Henderson two years ago. He fell from the top spot but landed in fourth place even with 60 percent pay cut caused almost entirely by lower stock and option awards.
THE EFFECT OF EXERCISING
In coming up with the annual Sweet 16 of CEO compensation, the Las Vegas Review-Journal followed the calculations prescribed by the Securities and Exchange Commission for the proxy statements that announce annual meetings. By that standard, Steve Wynn of Wynn Resorts, Limited led the pack at $17.7 million.
But when adding the $30.6 million he netted by exercising stock options on top of his $10.7 million in regular pay, Sheldon Adelson of Las Vegas Sands Corp. blew the rest of the field away.
Because options are included in the pay numbers when they are awarded, generally several years before an exercise, SEC rules preclude double counting options when they are cashed in. The amount also does not always represent cash in the CEO’s pocket, but just the difference between a stock’s market price and the lower option price.
For exercises, Sheldon Adelson’s wife, Dr. Miriam Adelson, came in light-years ahead of everyone else. She earns about $50,000 a year on Las Vegas Sands’ payroll as the director of community involvement. But she reaped at least $3.8 billion in 2012 for her role in helping to stabilize the company when its balance sheet wobbled during the recession.
The Las Vegas Sands Corp. proxy does not calculate the size of the benefit but rather describes the structure of the transaction. In November 2008, Miriam Adelson invested $525 million in the company for a package of preferred stock and warrants for common stock on the same terms as those offered to the public in a concurrent securities offering. The warrants, which closely resemble options, allowed her to buy 87.5 million shares at $6 each.
The proxy said she chose to exercise the warrants on March 2, when the stock’s low price was $56.31. Multiplying the $50.31 difference by the number of shares yields $4.4 billion, dropping to $3.88 billion when subtracting the 2008 purchase price. Company documents don’t detail how much of the purchase price was allocated to the warrants, but a spokesman said she has kept the shares rather than sell them.
DISSECTING THE NUMBERS
Spring has become the busy season for the cottage industry that has emerged around executive compensation as proxy statements get filed. Numerous advocacy groups have dissected the numbers to back cases that CEOs have come to view companies as personal ATMs for pay and perks.
This year, International Game Technology joined the critics. In trying to fight off a board of directors election fight from a group that included former Chairman and CEO Charles Mathewson, the incumbents adopted language that even the most avid critics would embrace. In a Feb. 1 letter to shareholders, the incumbents took aim at “questionable compensation practices” that included having shareholders “continue funding his lavish lifestyle even after his retirement from the board” in 2003.
Now, midsize and large companies go to great lengths to spell out their policies, explaining how they compare with those of similar companies and detailing standards for computing equity or cash bonuses. NV Energy, for example, spends 40 pages to explain not only what it did but why.
The ultimate stated goal remains aligning pay with shareholder interests, as measured by stock price and dividend gains. But in only eight instances did pay and return rise or fall in tandem on the Sweet 16 list, while others diverged — including lower pay after better stock performance.
For most of the companies, base salary now accounts for one-fourth or less of the total pay package.
Among the highlights:
¦ Wynn continues to have by far the largest severance plans. The $58.3 million he would receive in the event of death or complete disability by itself is larger than anyone else’s, but it rises to $239.2 million if he loses his job in a takeover. Also, Wynn was the only one who claimed merchandise discounts.
¦ NV Energy bases one bonus payment partly on a customer satisfaction survey. The proxy said that the report, prepared by the firm Market Strategies International, gave the company a 71.8 percent score, 0.2 points below the level designated as “on target.”
¦ Only three companies paid cash bonuses. The bulk of nonsalary compensation now comes in securities that take several years to mature.
¦ Gary Loveman’s 37 percent year-to-year drop at Caesars Entertainment Inc. was almost entirely because of lower stock option awards and a nonequity bonus program.
His above-median salary, according the proxy, reflects the size of the company and that several peers own much larger stakes in their companies.
¦ Sheldon Adelson and Maurice Gallagher Jr. of Allegiant Travel Co. were the only bosses who had several subordinates earning more in regular pay than they did. Gallagher takes no salary despite heading what has grown into a $1 billion-a-year company.
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