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TheStreet Open House

Aruze Publishes Letter To Wynn Resorts Stockholders

Stocks in this article: WYNN

In March 2012, Governance Metrics International (GMI) Ratings put out an alert that called into question Wynn Resorts' corporate governance. Naveen Reddy, research analyst at GMI Ratings, stated, "Wynn Resorts has a long history of governance issues. We give them a 'D' Rating when it comes to corporate governance."

A brief report on this new rating on the website of the National Association of Corporate Directors (" NACD") noted that the Company is involved in numerous related-party transactions with Mr. Wynn and his family.  NACD said, "For instance, both Steve Wynn and his ex-wife, a company director, lease apartments at Wynn Resorts properties in Las Vegas. Furthermore, the report found that if Wynn were to be dismissed, he would be entitled to a severance package worth quadruple his current annual rate of compensation — substantially higher than in most of the 1,775 biggest U.S. companies."

This penchant for running the company as if it were Mr. Wynn's alone is nothing new.  As the Wall Street Journal's Christina Binkley wrote in a 2000 article discussing MGM Grand's acquisition of Mirage Resorts Ltd., for which Mr. Wynn served as chairman of the board of directors, "despite its status as a public corporation, Mirage increasingly operated as Mr. Wynn's private domain."

The Universal Group's Nomination of Highly Qualified Independent Nominees

As detailed above, we believe that the Board lacks a sufficient level of independence from the Company's management and, in particular Mr. Wynn.   In fact, only seven of the 12 members (or 58.3%) of the Board are currently independent under NASDAQ listing standards.  In its 2011 report on the Company, proxy advisory firm ISS noted the low level of independent directors on the Board, stating, "[i]nvestors generally prefer that independent directors be a substantial majority of the company's board."  We further believe that the Company's recent poor performance and corporate governance issues are directly attributable to this lack of independence.

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