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Regarding Consistent Performance CEO Compensation 2002 Written By:
Keith Kefgen and
Stephen Goebel
Click here to view The 2002 Gaming Industry CEO Survey The only thing tougher than getting to the top is staying there. If consistently is a business virtue, it seems that gaming CEOs are delivering the goods. In this year’s survey of 60 publicly traded gaming companies, an amazing 63% of all CEOs achieved an HVS Value Index of greater than 90 (100 is the target). With the turbulent financial climate of the past two years, these results are getting Wall Street’s attention. Furthermore, in the post Enron era, investors are more closely scrutinizing company financials and executive pay practices. Of course, there is the other 37% to be accounted for as well, so, once again in our year 2002 study of CEO performance we recognize both the best, and worst of those achievements. Consistently Best Our study focuses on CEO performance by analyzing the stock and financial performance of each company relative to the Chief Executives total compensation. Using our proprietary pay-for-performance model, each CEO is compared to the entire peer group. We further level the playing field by separating the results into two groups, suppliers and operators. This year, for the third consecutive time, the Chief of a mid-cap gaming operator achieved the best performance by a CEO. Craig H. Neilsen of Ameristar Casinos, with an HVS Value Index of 186.24 joins Bernard Goldstein of Isle of Capri, and James Perry of Argosy Gaming in this elite group. In fact, all of the top five gaming operators operate in so-called “secondary markets”. Perhaps, the other markets have come of age?
Also among this years top operators, Jack E. Pratt of Hollywood Casino Corporation, and Randall D. Sampson of Canterbury Park Holdings Corp. are familiar names, repeating their appearance on last years list. Mr. Pratt has averaged an outstanding HVS Value Index of 151.26 for the two years, and late last year turned over his job to Ed Pratt III. Judging from Hollywood Casino Corp.’s continued success, he left the firm in good hands. Both Paul W. Lowden of Archon Corp. (formerly Santa Fe Gaming) and Deborah A.Vitale of Europa Cruises deserve congratulations for making the most of difficult situations. Joseph J. Lahti, making his second consecutive appearance on our list of top five suppliers, was this year’s top supplier CEO with a Value Index of 172.16 (See table 5 Best CEO Suppliers). Mr. Lahti resigned as CEO of Shuffle Master Inc., but remains Chairman of the Board. Perennial achiever Dr. Aelred J. Kurtenbach of Daktronics is once again on this list of top performing suppliers, and Bernard Albanese of Interactive Systems Worldwide makes his second appearance in as many years. Gordon T. Graves of Multimedia Games Inc. is a story of rags to riches. In last years study he was on our list of five worst performing CEO’s, and this year is among our five best suppliers. Consistently Worst It isn’t always good to be consistent. Not, at least, if you are Eric Endy, of Paul-Son Gaming. He has the dubious distinction of being the worst performing CEO in gaming for the second consecutive year (see 5 Worst Performing CEO’s table). There has been a sad turn in fortune for Paul-Son Gaming as Mr. Endy’s father was our best performing CEO in 1998, and Mr. Endy himself was in the 5 Best Performing Supplier category two years ago. Another very familiar name in this category is that of Clark D. Stewart of Butler National, who has been among our five worst performing CEO’s in six of the last seven years, missing only last year when Butler Nationals proxy statement was not available for our study. Even among the under-achieving group, this was a relatively good year. The aggregate HVS Value Index rating for the worst performers this year is 20.21, as compared to 11.02 a year ago. However, with that improvement the group is still overpaid by 79.8 %, offering very small consolation for companies shareholders. Consistently Wealthy The list of CEO’s with the largest future payday has changed a bit for the first time in five years with Philip G. Satre of Harrah’s Entertainment Inc., and J. Terrence Lanni, of MGM/Mirage being the only familiar names. A. Lorne Weil, of Scientific Games completed the merging of Autotote, and Scientific Games to form a diverse and more powerful company, while the emergence of Penn National as a force in the industry has created a future fortune for Peter M. Carlino. The common thread for all the CEO’s in this category is that their Value Index rating is near 100 or better (see table Fortunes in Waiting), so there can be no question that they have earned their paydays. On the list of CEO’s with the greatest beneficial ownership of their companies, there has been no challenger to Mickey Arison since Steve Wynn sold Mirage Resorts. However Mr. Arison is also a consistent achiever in our Value Index rating with 95.87 this year, and 101.75 in last year’s survey. Like Mr. Arison, the other names on this list are synonymous with their companies (see table, A Piece of the Action). The list of top gaming salary earners (see table Top Gaming Salaries) is a model of consistency. The only name on this list that was not on it a year ago is that of Robert M. Fell of Youbet.com Inc. He is also the only member of the group to have achieved an HVS Value Index of less than 93.7.
Over the last two years we have witnessed a trend towards very lucrative bonus payments, which has leveled off this year. Not that the top bonus payments in gaming could be considered meager, but the average bonus in the top five CEO’S this year was $1,255,600, as compared to last years average of $1,556,000. Four of the five top bonus earners were on this list last year, and have value index ratings that indicate their bonuses were deserved. The only newcomer to this list, James Perry of Argosy Gaming with an HVS Value Index of 121.25 is certainly earning his bonus. Philip G. Satre, and Mickey Arison are the only CEO’s to repeat on this year’s list of top stock incentive awards, and they have been on the list for the last three years. This year’s top stock awards are substantially less than a year ago also (see table, Top Stock Incentives). While last years top five in this category earned a total of $39,762,000, or $7,952,400 per CEO, this year’s group was awarded $21,123,000, or an average of $4,224,600 per person. On Paying for Performance It appears that many gaming board of directors are getting the message; its not the size of a CEO’s paycheck, its whether they earn it or not. Linking CEO pay to company performance is the most appropriate way to link management and shareholders interests. Consider that in our last two surveys, only one of the top 20 highest paid CEO’s had a value index below 90. The gaming industry has been quite resilient, which is a testament to strong leadership and a willingness to put your money where your mouth is. We also believe that a balanced scorecard is necessary in determining executive pay. Abuse can occur when company executives focus on only one financial measure (i.e. Earnings Per Share, EBITDA, or stock price). The wise companies are adopting a more balanced approach that can ward off conflicts of interest like those that brought down Enron, Adelphia and WorldCom.
Reprinted with the permission of IGWB Click here to view The 2002 Gaming
Industry CEO Survey
Keith Kefgen Stephen Goebel |
Keith
Kefgen is President of HVS Executive Search, the leading executive search
firm specializing in the lodging, gaming, and restaurant industries.
Stephen
Goebel, Vice President of HVS Executive Search, is responsible for managing
the firm's gaming industry practice. Goebel runs an office in Las Vegas and
serves the gaming industry's growing need for executive talent.
hospitalitycareernet.com
is an internet recruiting service for hospitality professionals. The site
provides state-of-the-art solutions for employment, news, career advice,
compensation, assessment and more.
20
20 Skills™ is a powerful tool for both setting internal benchmarks and
screening job candidates
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