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Wynn Resorts "failed to put batteries in the smoke detector": report

Tuesday, 08 May 2018 07:05
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Just days after shareholder advisory firm Glass, Lewis & Co backed Elaine Wynn’s call for shareholders to “Withhold the vote” of Wynn Resorts board member John “Jay” Hagenbuch at the company’s upcoming AGM, a second advisory firm has done the same.

In a report released on Monday, Institutional Shareholder Services (ISS) accused the Wynn Resorts board of taking a “short-sighted view of risk” and of “failing to change the batteries of the smoke detectors well before the fire broke out.”

The comments made in the report echo accusations from the company’s co-founder and biggest shareholder Elaine Wynn that the board didn’t act quickly enough in the wake of allegations of sexual misconduct leveled at former Chairman and CEO Steve Wynn in February.

Mr Wynn later stepped down from his role.

The ISS report points to Elaine Wynn’s campaign against Hagenbuch for being “part of a legacy board that oversaw material failures in governance and risk oversight,” adding that, “Given Hagenbuch bears responsibility, along with other legacy directors, for failing to address longstanding governance and risk oversight shortcomings that appear to have magnified the fallout related to the former founder/CEO's sudden departure … the benefits of his continued presence on the board do not seem to outweigh the risks associated with permanence.”

“Although the board responded swiftly to the crisis surrounding Wynn's departure, the degree of board-level change needed to contain the fallout from this crisis seems to reflect a short-sighted view of risk and overall poor governance over many years on the part of legacy directors.”

In response to this latest report, Wynn Resorts accused ISS of placing “symbolism ahead of pragmatism” and questioned the motives behind Elaine Wynn’s “Withhold the vote” campaign.

“We appreciate that ISS’s report recognizes our board’s swift and decisive actions to promote change over the past three months, including an ongoing board refreshment process that has already resulted in the addition of three highly qualified female directors who strengthen the board’s skill sets, experience and diversity,” the company said.

“However, by recommending that votes be withheld on Jay Hagenbuch, ISS has placed symbolism ahead of pragmatism. Over the five-and-a-half years that he has served on the board, Jay has made important contributions that have benefited shareholders and shareholder value. The entire board believes that shareholders benefit from Jay's knowledge of the company, our financial operations and our specialized regulatory framework.

“By recommending that shareholders not vote Elaine Wynn's blue card, ISS clearly recognizes the weaknesses in Elaine Wynn's campaign and notes that her arguments very well might be motivated by personal animosity. It also highlights her position as a member of the Wynn Board for a prolonged period of time and questions her own culpability for many of the things for which she now criticizes the board.”

 

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