SAY HELLO TO MR. BIG
As the gaming industry has expanded its reach around the globe, top executives have reaped the rewards: increasingly lucrative pay packages, wider use of company aircraft, personal security services and substantial executive retirement payments.
Four local gaming chief executives had base salaries of at least $2 million in 2006, documents filed with the Securities and Exchange Commission show.
MGM Mirage Chairman and Chief Executive Officer Terry Lanni’s $15.7 million compensation package in 2006 was the gaming industry’s highest.
Lanni earned a base salary of $2 million, the third-highest in the industry. His pay was bolstered by incentives, deferred payments and other costs to the company, including $251,686 for aircraft use, mostly between Las Vegas and Southern California.
Although Lanni’s pay isn’t the $1 million a week Roger Clemens will make this year to pitch for the New York Yankees, gaming industry experts believe executive pay packages are where they should be if not a little behind the curve.
"The demands of the CEO to expand a global organization have been significant," said Glen Schostak of the Los Angeles-based executive search firm Korn/Ferry International. "I don’t feel that there is anybody in the gaming industry that is overcompensated, mainly because of the demands of the business."
Paul Hodgson, senior research associate at The Corporate Library, a Portland, Maine-based independent executive pay research firm, said that gaming compensation committees look to other leisure industry businesses — Walt Disney Co., Carnival Corp., Clear Channel Communications — when setting pay.
The theory is that it would be harder for those outside leisure companies to raid gaming ranks for executive talent if the pay is competitive.
"(Gaming executives) end up with high pay even though it is a comparatively simple operation to run and usually a lot smaller with fewer employees," Hodgson said.
Even if a gaming company is not as complex as the multidimensional Walt Disney Co., analysts point to the spread of gaming as proof that gaming executives’ responsibilities are expanding and demand higher pay.
MGM Mirage is a much different company than the one Lanni took control of in 1995 for a base salary of about $500,000. When Lanni was hired as CEO of MGM Grand it was a public company with one major asset and 7,000 employees.
He has since helped guide the company through the opening of NewYork-New York in 1997 and the $6.4 billion buyout of competitor Mirage Resorts in May 2000.
In April 2005 he directed the company through its second large buyout with the $7.9 billion purchase of Mandalay Resort Group.
Today, MGM Mirage has 10 large hotel-casinos in Las Vegas and investments in condominium projects, golf courses, international markets and future development projects.
The company has gone from annual revenues of $600 million in 1997 to $7 billion in 2006 with 67,000 employees.
The company is involved in two large construction projects: the $1.1 billion MGM Grand Macau and $7.4 billion CityCenter.
These kinds of changes and the value they create for companies justify salary increases for top executives, Deutsche Bank gaming analyst Bill Lerner said.
"It’s an issue where some executives are underpaid relative to other industries," Lerner said. "Especially if you look at how much cash flow the industry is generating and how quickly earnings have grown."
Steve Wynn had the gaming industry’s highest base salary in 2006, $2.8 million. After incentives and other compensation, mostly tied to bonuses, Wynn’s pay package totaled nearly $10 million. Wynn also has use of a company jet at a cost of $237,285 to the company.
Wynn was paid a lot, but his company’s stock rose a lot, too. Wynn Resorts Ltd.’s stock price rose 71 percent in 2006; it opened the year at $54.85 per share and closed Dec. 29 at $93.85. On Feb. 5, Wynn Resorts’ stock price hit an all-time high with an adjusted close of $114.07 per share.
Wynn Resorts shares closed at $93.74 on Friday.
The company has worked as furiously as its stock price has risen. After opening the $2.7 billion Wynn Las Vegas in April 2005, the company entered Asia with the $1.2 billion Wynn Macau in September.
Future plans include the $2.1 billion Encore project under construction on the Strip, another hotel tower at the Macau property and other projects that could further boost the company’s value.
"I look at Steve Wynn’s compensation and I think ‘Wow, that’s conservative for the amount of value he’s created,’" Lerner said.
Station Casinos Chairman and CEO Frank Fertitta III cost his company $12 million in incentives, deferred pay and other costs. His base salary was $2.2 million.
Fertitta, whose perks include $571,447 for personal security and $107,544 for aircraft use, has been chairman and CEO since the company went public in 1993.
The company has grown from one property, Palace Station, to 15 properties with more under construction or in development.
Harrah’s Entertainment Chairman and CEO Gary Loveman made a base salary of $2 million in 2006. His total compensation cost the company $14.2 million; his package included $435,786 for aircraft use and $276,720 for security.
"You could argue all executives are being paid too much," said Bill Thompson, a University of Nevada, Las Vegas professor and casino industry observer. "As long as the stockholders are happy with the results of the stocks, I don’t think they care about executive salaries. If the companies were losing money that would be another thing."
This issue of executive pay does not seem to bother the local unions, either, at least on the surface.
D. Taylor, secretary-treasurer of the Culinary Union Local 226, which represents approximately 60,000 workers at Strip properties, said executive pay is not an issue as long as the frontline people who help generate the properties’ success are rewarded and respected.
"We really don’t care what the people in the executive branch make just as long as our members and their families can share in the wealth and have decent pay and job security," he said.
The Culinary union is negotiating contract renewals with many of the gaming companies along the Strip including Harrah’s Entertainment and MGM Mirage.
Executive pay packages are better thought of in accounting terms: What did the company book last year for the CEO’s compensation? As an example, MGM Mirage CEO Terry Lanni’s package reveals he received $8.6 million in cash through base salary and incentives and $6 million in stock awards and options. $1 million was charged to MGM Mirage for other compensation, including $716,958 put into his executive retirement plan by the company, as well as aircraft use, deferred salary and 401(k) match. The first number is the executive’s total compensation. The breakdowns don’t always add up to that total because not all other compensation for each executive is listed.
