Slot machine giant International Game Technology will seat a reconfigured board of directors next month, with many of the members having little experience within the gaming industry.
Chairman Phil Satre, the longtime chief executive officer of casino giant Harrah’s Entertainment (now Caesars Entertainment Corp.), who joined the board in 2009, and current IGT CEO Patti Hart, are the only two board members from the gaming industry.
Former Nevada Gov. Bob Miller, who joined the board in 2000, remains the panel’s longest-serving member. Two longtime board members, former company CEO and Chairman TJ Matthews and Robert Mathewson, son of long-time IGT Chairman Chuck Mathewson, didn’t stand for re-election.
Other than Paget Alves, who spent two years on the board of lottery provider Gtech Holdings Corp., IGT’s outside leadership is predominantly made up of individuals with experience from within the technology sector.
IGT’s board is also being reduced from 10 members to eight.
Wall Street believes gaming companies often benefit from experience away from the casino floor.
“IGT’s competitors have been successful by adding perspectives from outside the industry at the board and operating levels,” Jefferies & Co. gaming analyst David Katz said. “This approach can broaden the experience and knowledge base that is brought to the company’s strategies.”
IGT’s board members come from telecommunications companies, computer manufacturers, software developers and broadcasting.
One board member, Greg Creed, who was elected to the board in September, held executive positions with restaurant operator Yum Brands. He is now president and chief concept officer for Yum subsidiary Taco Bell.
Rival slot machine makers have directors from outside the gaming industry, but not to the extent of IGT.
The five-person board governing Bally Technologies has been in place since 2006. One board member was a long-time executive with a public accounting firm. Company CEO Richard Haddrill joined the board in 2003.
Two Bally board members have been on the panel since the mid-1990s while current Chairman Kevin Verner held positions with slot machine rival WMS Industries in the late 1990s.
Meanwhile, WMS’s nine-person board includes CEO and Chairman Brian Gamache, who has been with the manufacturer since 2000, founding director Louis Nicastro, who has been on the board since the company’s incorporation in 1974, and his son, former WMS CEO Neil Nicastro.
WMS’ board also includes a New York attorney, a former Xerox Corp. executive, a former Hyatt Hotels official and former Nevada Gaming Control Board member Bobby Siller, who had been the Special Agent in Charge of the FBI office in Las Vegas.
Roth Capital Partners gaming analyst Todd Eilers said slot machine manufacturers should have a board and executive team with a variety of backgrounds and experience.
“I think it’s definitely important to have a technology focus as games and systems converge, and Internet gaming and mobile gaming become more widespread,” Eilers said. “However, I also think it’s important to retain key gaming experience and talent.”
Quietly, some analysts wonder whether Hart, IGT’s CEO since April 2009, is stacking the board with her contemporaries from California’s Silicon Valley, a national high-tech hotbed.
Hart, who had left the CEO position of technology company Pinnacle Systems in 2005 to join the boards of four public corporations including IGT in 2006, took over the slot maker’s day-to-day operations from Matthews.
Declining slot machines sales, due to a two-year-long economic slump, forced IGT to eliminate 700 jobs and cut more than $200 million in corporate expenses, moves that began under Matthews’ tenure. Several longtime company executives also left in the past year.
“The new management team is steering the ship in the right direction and the culture is improving,” Credit Suisse gaming analyst Joel Simkins told investors following the company’s first-quarter earnings announcement in January.
“IGT has gotten its house in order after some rough sledding for the last few years,” Simkins said. “We remain confident that the new leaner operating model should allow significant flow through to the bottom line.”
Katz said the gaming industry has unique characteristics, with the regulatory system being the most prominent. Executives from other industries could have a long learning curve.
“Over the long term, the broad perspective should be a key advantage, although it could take a little longer for the fresh perspective to have an impact on earnings per share,” Katz said.
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