Elaine Wynn, the largest shareholder in Wynn Resorts Ltd, questioned Monday whether the company’s outgoing general counsel, Kim Sinatra, should receive as much as $9.5 million in severance pay.
The Las Vegas-based gaming company announced last week that Sinatra would leave her position as general counsel and corporate secretary effective July 15. Wynn Resorts did not give a reason for her departure nor state what compensation she would receive.
“Ms. Wynn communicated to the board her concerns that the board would do something inappropriate with respect to the terms of the departure for Sinatra,” Elaine Wynn said in a statement filed by her lawyers with the Securities and Exchange Commission Monday.
Sinatra’s departure comes as regulators and the board continue to investigate Wynn Resort executives’ handling of sexual harassment claims. Allegations emerged in late January that former CEO Steve Wynn had sexually harassed employees over decades. Steve Wynn has denied the allegations.
Elaine Wynn told a court in March she informed Sinatra in 2009 that Steve Wynn had settled a sexual harassment lawsuit with a female employee. Sinatra may have violated fiduciary duty by not notifying the board, said Jeffrey Sonnenfeld of Yale Management School.
In her statement, Elaine Wynn “urged the Board to consider whether the company should take the position that this (departure) is a ‘for cause’ termination.”
That would mean limited or no severance pay for Sinatra, the third-highest paid employee at Wynn Resorts last year.
“If the Wynn board determines she has been terminated for cause, it is unlikely she will get future salary, bonuses and some or all of the stock she has been promised,” said Dennis Gutwald, an attorney at McDonald Carano in Las Vegas.
Sinatra signed to a new work contract with Wynn Resorts on Feb. 28, 2017 that specified a yearly salary of $1 million and a grant of 100,000 shares that vest fully in November 2021. The new work agreement went into effect Nov. 4, 2016 and was set to expire Feb. 17, 2020.
The agreement stipulated that upon termination without cause by Wynn Resorts, the 58-year-old would be entitled to receive the remainder of her salary to 2020, annual bonuses as well as stock pro-rated for the number of months she worked under the new contract.
Sinatra’s remaining salary is $1.5 million while her pro-rated Wynn Resorts shares are worth about $8 million based on Monday’s closing price of $160.19.
Elaine Wynn also asked the board to consider a clawback provision that would require Sinatra to return some of her termination compensation if she does not cooperate with investigations or if the board later determines that there were grounds for a “for cause” termination.
Sinatra has been one of the highest-paid executives on the Strip over the past decade as she helped drive Wynn Resorts’ expansion into Macau and Boston. Since 2009 she has earned more than $42 million in total compensation, including stock grants that have not yet vested, according to Equilar, a data compiler.
Elaine Wynn, a former board director, and Sinatra have had a very tense relationship ever since Elaine Wynn sought a revised divorce settlement with her ex-husband in 2012.
Sinatra was eventually dragged into their bitter, six-year fight after Elaine Wynn told a court in March that she informed the general counsel about Steve Wynn’s 2005 settlement with a former employee involving a paternity claim.
Sinatra later issued a press release stating that Elaine Wynn only “made an oblique reference to a settlement” during their conversation. Sinatra consulted with attorneys and reported her findings back to Elaine Wynn and neither brought it up with the board.
Elaine Wynn also called on the board Monday to end its practice of staggered elections. All directors should face reelection annually rather than every three years, she said in the filing.
Staggered elections make it difficult to quickly change the composition of a board and push out a management team that is facing shareholder revolt. Nearly 90 percent of S&P 500 companies hold annual elections for all directors, the statement said.
Elaine Wynn, who owns 8.8 percent of Wynn Resorts, disclosed in Monday’s statement that she recently put forth a board candidate for chairman. Elaine Wynn, who did not name the candidate, said the individual would only agree to serve if offered the chairman or vice chairman position.
The board rejected her candidate for a leadership position, she said.
“The Board of Directors is actively continuing its work to refresh the board, including reviewing candidates submitted by Elaine Wynn,” Wynn Resorts said in a statement on Monday.
“One-third of the board is new as of this year, and the board anticipates that it will announce additional new members by the end of the summer.”