The three leading shareholder advisory firms have thrown their support behind Elaine Wynn’s battle to clean house in the board room of Wynn Resorts.
International Shareholder Services, Glass Lewis and Egan-Jones, all critics of corporate governance at the company, particularly in matters of director and executive pay, have taken up Wynn’s proxy campaign for a no vote on the re-election of director John Hagenbuch at the company’s annual meeting on Wednesday.
She emerged as the largest shareholder in March after her ex-husband Steve Wynn resigned as chairman and CEO and sold all his stock in the wake of accusations widely reported in the media that’d he’d been harassing female employees of the company for years.
The problem for Elaine Wynn is that the board is still packed with his close friends and associates, Hagenbuch among them, so she’s contended in her communications with shareholders in the run-up to the meeting,
ISS, Glass Lewis and Egan-Jones agree.
The latter put it bluntly, “The board needs to be refreshed, not only with new members, but with new ideas and perspectives.”
ISS characterized the election as a “referendum, not only on whether the current board has done enough to stem the fallout of the accusations against Steve Wynn, but also on whether the current board composition is sufficiently robust to minimize the possibility that similar issues re-emerge in the future.”
Hagenbuch, an Idaho businessman and director since 2012, has two strikes against him in the eyes of governance watchdogs: first, as a member of the board’s compensation committee, whose pay policies have been lavishly excessive, they say; second, he serves on a special committee of directors formed back in February to investigate the allegations against Wynn.
“We believe that the mere presence of Jay Hagenbuch in the board presents a strong conflict of interest, given that he has close ties with Mr. Wynn,” Egan-Jones said. “Mr. Hagenbuch, as a member of the special committee that investigates the misconduct of Mr. Wynn, puts the credibility of the whole probe in question. As such, the reputation of the company and the board is also compromised.”
Glass Lewis, which criticized as “questionable” his role on the investigating committee, said it takes issue as well with “his shared culpability for years of misaligned compensation practices”.
The firm did not spare Elaine Wynn either, saying she bears part of the blame for what it called a “regressive” board.
She was a director from time of the company’s founding in 2002 until 2015, when she was ousted in the midst of a court battle with her ex-husband to void provisions in their 2010 divorce settlement that gave him effective control of her shares.
The board, whose new chairman, D. Boone Wayson, is a longtime director and childhood friend of Steve Wynn’s, has stood behind Hagenbuch. Wynn Resorts, citing his “knowledge of the company, our financial operations and industry environment,” describing him in a recent filing with the SEC as “fully independent” and “committed to acting in the best interests of our shareholders.”
Elaine Wynn is suing in state court in Las Vegas to postpone the annual meeting in hopes she can force a reopening of the nominations for directorships. Among her concerns is that the company may try to sell a potentially lucrative megaresort it is building outside Boston to cut short an investigation by the Massachusetts Gaming Commission into what the board and senior executives may have known about Steve Wynn’s alleged misdeeds, which in one case resulted in a $7.5 million payment to one of his purported victims that was not reported to the commission at the time he applied for licensing.
Nevada’s Gaming Control Board also is looking into the allegations.
“Some members of the current board are directly implicated by the Massachusetts regulatory investigation,” Elaine Wynn stated in a letter to shareholders. “I do not know what the commission will conclude, but I believe that the legacy directors would prefer that their actions not be scrutinized by the gaming officials.”
Egan-Jones said, “We believe that in order to minimize the impact of both the Massachusetts and Nevada investigations, removal of as many directors (long-tenured directors) potentially tainted by this issue as possible is in the best interests of shareholders.”
