CEO pay in a year of reckoning…
Gaming industry executives were not immune to #MeToo and tough-to-meet investor performance expectations, both of which led to leadership turnover despite the strong financial and stock market results of casino companies. The last 18 months have been a reckoning for powerful men in the business world and gaming has been no exception.
The #MeToo movement struck down one of the most recognizable names in the gaming industry when Steve Wynn stepped down from the company he founded, Wynn Resorts. Meanwhile, unmet business expectations may be the reason five other prominent gaming CEOs are out or will soon be relieved of their duties, including Caesars CEO Mark Fissora, who is leaving in early 2019. Of course, these circumstance continue to shine a spotlight on CEO pay, severance and golden parachutes.
All that said, it was a very solid year for casinos stocks, with many of the bigger gaming companies outperforming the smaller ones. In our 12th annual study of gaming industry pay, we evaluated the performance of 34 public gaming companies in determining whether a CEO deserved his or her pay. The AETHOS pay-for-performance model compares significant financial metrics such as company size (market cap), stock appreciation (rise in stock price over three years), EBITDA growth (over three years) and total direct compensation (combination of salary, bonus, LTIP and other). Our findings are illustrated below.
THE PAY GAME
It comes as no surprise that the highest paid CEOs in the gaming industry work for the largest companies. Steve Wynn topped the list again as the highest paid CEO in gaming at $34.5 million in total compensation. Sheldon Adelson at Las Vegas Sands came in second at $26 million in total compensation. Ken Alexander at GVC and Fissora both were $20+ million-dollar men.
In total, 26 of the 34 CEOs made more than $1 million in total compensation; up two from last year, with two less companies in the study.
The average CEO paycheck went up substantially as well, to $7.2 million. That is nearly $2 million more than last year’s study… a sign that CEOs are clearly getting larger equity packages in a consolidating marketplace.
For a second year in a row, the best CEO on a pay-for-performance basis was Dan Lee, CEO at Full House. Other top performers included Gary Carano at Eldorado Resorts and Tim Wilmott at Penn National. In Lee’s case, our analysis suggests he should have been paid double what he was paid, and Wilmott could have earned nearly $4 million without jeopardizing his performance.
In terms of base salary, 13 CEOs in the gaming industry received $1 million or more. Sheldon Adelson and Lawrence Ho had the largest salaries, at $5 million and $3.5 million respectively. The average salary of the group came in at just over $1.1 million.
As most bonus programs are tied to base pay, it comes as no surprise that many of the most highly paid CEOs also received the largest bonuses, with Wynn leading the group with a bonus of $15 million. The next largest bonus was Adelson at $12.5 million. The average CEO bonus for the group was $1.1 million, rising another $600,000 from last year. Only four gaming CEOs received no bonus, and all had weak financial performance and low performance indices.
The largest component of CEO compensation were long-term incentive plans (LTIPs), a sign that pay-for-performance continues to be a major focus for public boards. The average LTIP value was $3.7 million, more than double from the previous year. Ken Alexander topped the list with his nearly $21 million stock grant, followed by Fissora at $17 million. Twenty-one CEOs received an equity grant worth over $1million, while only four received nothing at all. It appears that gaming boards are getting more in line with standard pay practices in the Fortune 1000.
One of the most pressing issues for compensation committees is that of severance and claw-backs, with Institutional Shareholder Services (ISS) and other watchdog organizations looking at how disgraced and underperforming CEOs are being paid as they exit the company. For example, Wells Fargo clawed back over $75 million in pay from former CEO, John Stumpf. In contrast, former Fox News President Roger Ailes received $47 million in severance when he left 21st Century Fox amid sexual harassment allegations. Interestingly, the Wynn board came to an agreement with Steve Wynn that paid him nothing in severance. Per his employment contract, he would have been paid him nearly $250 million had he been dismissed from the company “without cause.”