Elaine Wynn wins advisory backing in board battle

Elaine Wynn speaks during a Las Vegas Metro Chamber of Commerce Business Power Luncheon on Wednesday, May 8, 2013, at the Rio.

Elaine Wynn has secured a third-party advisory endorsement in her contentious campaign for re-election to the board of Wynn Resorts, making her tied with her opponents as the public fight approaches its climax.

Egan-Jones recently advised Wynn Resorts stockholders to support Wynn’s candidacy over the two nominees supported by the board. Previously, the board’s nominees won the backing of Glass, Lewis & Co., while Institutional Shareholder Services advised stockholders to reject all three candidates, citing concerns about corporate governance.

In its report, Egan-Jones criticized the way the board has handled its dispute with Wynn, a company co-founder and its third-largest shareholder. Additionally, Egan-Jones cited a “continuing multiyear decline in the company’s stock price,” and therefore said it was compelled to support Wynn’s candidacy.

The report also called into question the company’s focus on only a handful of properties, a concern which, coupled with little diversity in the boardroom, made Egan-Jones feel “forced to conclude that change is sorely needed with the Wynn Board.”

“However, the change we envision is not that of a smaller and even less diverse board of only men as the current board has put forth, but rather a more diverse board with members of both sexes that is able to navigate the many challenges the company faces with a diversity of skills and experience; a board for 2015, not 1915,” the report said.

At the center of the entire fight is a stockholder agreement between Wynn and her now ex-husband, CEO Steve Wynn, that she has tried to get out of. The agreement limits her ability to sell shares, and the board fears that if those restrictions are dissolved, a change of control provision could be triggered that would require the company to refinance debt under less favorable terms.

But Egan-Jones said that “tossing a near 10 percent shareholder off the board does not seem like a good way to keep that shareholder from selling those shares,” or a significant amount of them, if her lawsuit to lift the restrictions is successful.

“We believe that the support of Ms. Wynn election to the Board of Directors along with withholding support from all other nominees at this time is the course of action most likely to bring pressure to bear on the existing board with the aim of creating the exceptional board of diverse backgrounds and experience the Wynn shareholder’s both need and deserve,” the report concluded.

Wynn Resorts said in a statement emailed by a spokesperson that it “strongly disagree(s) with Egan-Jones’ recommendation.” The company said Egan-Jones neglected to acknowledge Wynn’s “inherent conflict of interest” or give “proper weight” to the board’s promise that it will increase its size, with an emphasis on diversity, later this year.

Unsurprisingly, Wynn lauded the Egan-Jones report in her own emailed statement, saying it correctly drew attention to the most important part of the election. In a separate press release, she also highlighted recent remarks made by Steve Wynn to the television host Charlie Rose.

Steve Wynn told Rose that he “didn’t happen to agree” with the board’s slate of directors that excluded his ex-wife. And he admitted that the whole fight puts him in a tough spot.

“I'm in an impossibly embarrassing position of either not supporting my former wife, Elaine — which I'm happy to do and obliged to do — or not supporting my board of directors, who are all very, very fine, highly respected, independent men,” he told Rose.

However, after Elaine Wynn drew attention to the comments, Steve Wynn responded with his own statement saying that his remarks on the show “should not be misconstrued.”

Steve Wynn stressed that the company’s independent directors are responsible for picking candidates for the board, and they have “thoroughly and carefully explained” to stockholders why Elaine Wynn should not be renominated. He also emphasized that, under the stockholder agreement, he’s obligated to vote in favor of his ex-wife’s re-election.

“It is very important that all stockholders know that I have nothing but the highest respect for the independent directors, their business judgment and their overriding sense of fiduciary responsibility to Wynn Resorts and its stockholders,” Steve Wynn said in the statement.

The board battle will conclude at the Wynn Resorts annual stockholders’ meeting April 24.