Fortunes of Las Vegas executives success of company's stock


Is your company's CEO worth a small fortune in pay and perks, maybe even a raise in triple-digit percentages?

When measured against the goal of keeping compensation in sync with stock performance, the answer for the 16 highest-paid Las Vegas chief executives last year was generally "yes."

Half of those titans of local industry -- call them the CEO Sweet 16 -- received pay boosts as their company's stock gained ground. Another three saw their total compensation decline even as the share prices rose, while one got a raise even though the stock price dropped. Four CEOs run companies whose stock is not publicly traded.

Historically, the theory has been simple: If shareholders get richer, then CEOs should benefit. A number of critics, however, contend that the pay gap between the executive suite and the front counter has grown too wide, and often is influenced by other factors.

SHAREHOLDERS HAVE A 'SAY ON PAY'

For the first time this year, share­holders have been given a voice on CEO pay and benefits, which can include jets, villas, security guards and multimillion-dollar payouts even if they're fired.

So far, at least with Las Vegas-based companies, there has been little rancor: Shareholders at all 11 companies that have had nonbinding "Say on Pay" votes at their annual meetings approved proposed pay packages for executives, mostly by more than a 4-to-1 margin.

Those packages often go beyond salaries and bonuses, frequently less than half the total compensation.

For example, chart-topper Gary Loveman of Caesars Entertainment Corp., received a 206 percent pay bump that took him to a 2010 total of $18,266,000. All of the increase came from stock options that might take years to cash in with the final total uncertain. That followed a dismal 2009, when he received no options and his total compensation plunged 85 percent from the previous year.

Even though the CEO Sweet 16 might make more in one year than a typical blackjack dealer or a crew of house­keepers does in a lifetime, pay for the executives looks modest in a national context.

An AFL-CIO survey earlier this year found that the average CEO pay at 299 companies on the Standard & Poors 500 index was $11.3 million. In a new study for the New York Times, consulting firm Equilar calculated a median of $10.8 million for 200 companies. The Las Vegas median was $3.8 million.

Most of the Las Vegas Sweet 16 also had to make due with more modest raises. Both the AFL-CIO and Equilar determined that raises nationwide averaged 23 percent last year; in Las Vegas, only three did that well or better.

Some who track national compensation trends say the Say on Pay votes might have more effect in coming years. The Dodd-Frank Act passed by Congress last year authorized the Securities and Exchange Commission to institute Say on Pay, which explicitly gives share­holders the right to vote on CEO pay packages. Before that, about the only way shareholders could complain was to take the microphone at an annual meeting.

Numerous U.S. companies met this year with large shareholders to discuss complaints before having Say on Pay votes, said Patrick McGurn, a special counsel at the advisory firm Institutional Shareholder Services. In some cases, he noted, this meant defusing potential embarrassment by negotiating such things as heavy use of corporate jets or the size of golden parachutes -- the huge severance packages triggered by corporate takeovers.

Southwest Gas, for example, trimmed potential severance for top executives after a takeover, although the company's proxy statement did not link the change to Say on Pay. The new Southwest Gas severance plan eliminates the extra pay to cover the taxes on a large, lump-sum payout that has become a frequent target of executive pay critics.

EXECUTIVES FARE WELL AT THE BALLOT BOX

Few shareholders have bucked the status quo even when asked to vote on CEO pay. Just more than 91 percent of shareholders on average approved the big pay packages for their CEOs last year, according to Institutional Shareholder Services. Only 37 of 3,000 companies in the Russell 3000 Index symbolically rejected executive pay as excessive.

"By and large, investors are not looking at absolute pay when they vote, but the correlation of pay and performance," McGurn said.

"We are seeing the beginning of this trend. It's like turning around an oil tanker. It's a slow process."

In Las Vegas, only one of the 11 companies that had Say on Pay votes received less than 79 percent approval. The exception, 63 percent at Global Cash Access Holdings, followed a 2010 vote when CEO Scott Betts' total compensation rose by 17.6 percent as the stock value dropped by more than half.

Although 63 percent would be a landslide in politics, it falls into what McGurn termed a "red zone" of serious shareholder discontent.

Shareholders also are allowed to choose the frequency of Say on Pay votes. Most have chosen annual votes, though among the Las Vegas Sweet 16, Wynn Resorts, Boyd Gaming and Ameristar opted for a vote every three years.

Wynn's board said the longer interval is more in line with its policy of focusing on long-term results.

MGM Resorts pushed for the more common annual votes. That cycle, the company's proxy says, was "consistent with our policy of seeking input from, and engaging in discussions with, our stockholders on corporate governance matters and our named executive compensation."

In another attempt to make the pay process more accessible to share­holders, federal regulations have prodded companies to go to much greater lengths to explain their policies.

NV Energy devoted 44 pages in this year's proxy to unraveling the mysteries of how it arrives at its compensation amounts; predecessor Sierra Pacific Resources covered the subject in just five pages in 2006.

The company also included color-coded charts showing how well it met operational, financial and customer satisfaction goals, all factors in the pay of CEO Michael Yackira.

While less elaborate in their explanations, other firms have moved to make the fixed salary a smaller portion of a pay package, while variables tied to performance goals grow in importance. Straight bonuses are being replaced by more intricately constructed incentive plans.

Contact reporter Tim O'Reiley at toreiley@reviewjournal.com or 702-387-5290.

 

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