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Howard Stutz

Union Seeking Station Changes

26 April 2005

Three proposals backed by Culinary Local 226 that could change corporate governance at Station Casinos will be presented to shareholders at the company's annual meeting next month.

An official with the local affiliate of UNITE HERE said Monday that the union had received permission from the Securities and Exchange Commission to seek shareholder approval of the measures.

The union owns a little more than 200 shares in Station Casinos, the Las Vegas-based operator of nearly a dozen gambling properties. The proposals are the latest salvo in an ongoing conflict between the labor organization and the company.

Under the suggested changes to the company's bylaws, the union is asking that Station Casinos adopt a simple majority voting plan rather than require a supermajority of shareholders; require that members of the board of directors be elected annually; and let shareholders vote to keep or reject the company's "poison pill" anti-takeover device.

"These proposals would eliminate language that really isn't applicable to companies, including those in the gaming industry," said Chris Bohner, a research director with the union. "We look at the proposals as common sense reforms that would enhance shareholder rights."

Bohner said the Culinary is hoping for support from labor union pension funds, which own 200,000 shares of Station Casinos stock.

In its proxy statement, Station Casinos' board recommends that shareholders reject all three union proposals when they come up for a vote at the May 18 meeting at the Green Valley Ranch Station.

Station Casinos Chief Financial Officer Glenn Christenson said two of the three provisions have been in the company's bylaws since its incorporation. The "poison pill" provision was enacted eight years ago. He said many of the Standard & Poor's 500 companies, and many gaming companies, have similar provisions in their bylaws.

"Let's put this in perspective. If the union was serious, they would not have this double standard," Christenson said. "Several of the companies that have employees they represent have similar bylaws and provisions. They're not calling on those companies to make changes."

He called the union's motives "a continued harassment of Station's management."

Culinary representatives said the proposals are important given the gaming industry's recent merger activity. MGM Mirage closed its $7.9 billion buyout of the Mandalay Resort Group on Monday, while Harrah's Entertainment hopes to close its $9.4 billion purchase of Caesars Entertainment by June.

Coast Casinos, Station Casinos' primary competitor, was bought by Boyd Gaming last year for $1.3 billion.

"If there is an offer for the company, we believe that shareholders should have the ability to make their own decisions," Bohner said. "Unfortunately, Station's current corporate governance rules give too much power to the board at the expense of shareholders in the context of a merger or acquisition."

According to the company's proxy statement, members of the Fertitta family, who founded Station Casinos, are the principal stockholders. Executive officers and members of the board of directors control a little more than 18 percent of Station Casinos.

Christenson said companies with a single large shareholder don't need a "poison pill" provision. He said these types of provisions can enhance shareholder value if a buyout were tried.

The Culinary's suggested changes could be viewed as a continuation of the labor organization's battle to unionize the company's work force. Station Casinos is nonunion companywide.

In 2003, the union unsuccessfully challenged the extension of Station Casinos' stock compensation program at its annual shareholder meeting. Company shareholders voluntarily changed the compensation program a year later.

Last year, the union and the Sierra Club funded a flier opposing Station Casinos' plans for a 300-foot tower at its Red Rock Station casino site. Clark County commissioners approved a reduced height in the tower to 198 feet.

Union Seeking Station Changes is republished from