Analysis | Elaine Wynn, the ultimate shareholder activist

Did you read about the big shareholder activist win last week? Let me fill you in.

A few months ago, not long after the company’s chief executive resigned in disgrace, and its share price was in danger of collapsing, the activist gained control of 9 percent of the stock, worth about USD2 billion. This made her the company’s largest shareholder. With the company’s board packed with the ex-CEO’s cronies, she decided to mount a proxy fight, aimed at ousting one director, a 66-year-old real estate executive.

The proxy fight began in earnest a month ago. The company continually denigrated the activist in its communications to shareholders. But she stood firm, calling all the company’s big investors, explaining why she thought the board needed new directors who could establish a different tone.

By May 9, all three of the big independent proxy advisory firms were siding with her, urging investors to withhold their vote from the director she had targeted. Voting against him “will send a clear signal that the board needs to be refreshed, not only with new members but with new ideas and perspectives,” wrote one of the firms, Egan-Jones Ratings Co.

Last week, two days before the company’s annual meeting, the director she was attempting to oust stepped down, saying that he didn’t want his candidacy to become a “distraction.” The final vote was never revealed during the annual meeting, though rumors were rampant that the shareholder activist had won in a landslide. Indeed, so many investors voted with the activist that a second board member — the longest serving director — also resigned, even though he hadn’t been targeted. Take a bow, Elaine Wynn.

Now, I realize that Wynn is not your usual shareholder activist. She is the ex-wife of Steve Wynn, who founded Wynn Resorts Ltd. in 2002 and is often referred to as “the father of modern Las Vegas.” In happier times, she was also a Wynn Resorts board member, and played an important role helping to design its hotels. She knows the company about as well as anybody.

For years, she had been embroiled in a lawsuit, trying to regain the right to vote her 9 percent of the stock, something she had ceded to her ex-husband at the time of their second divorce. After he resigned in disgrace in February, accused of multiple incidents of sexual abuse — including paying off a woman he had forced to have sex with him — Steve Wynn settled the lawsuit, paying Elaine Wynn $25 million and returning her voting rights. In exiting the company, he also sold his 12 percent stake, which meant she was now Wynn Resorts’ biggest shareholder.

During the proxy fight, the company referred to Elaine Wynn as the “ex-wife,” as if she was some kind of vengeful former spouse, bent on damaging the company instead of improving it. In fact, she was trying to save it.

She worried, for instance, that without a refreshed board — one that was not wedded to the legacy of her former husband — regulators in Massachusetts would not allow the company to open its unfinished $2.5 billion casino near Boston. She was upset when she read that the new CEO, Matt Maddox, had told Bloomberg News that he was considering selling that casino. It didn’t help that Maddox was a longtime Steve Wynn crony — or that his 2017 compensation was $24.8 million, an extraordinary amount for someone who wasn’t then the CEO. (The board member she targeted, John Hagenbuch, was on the compensation committee.)

More broadly, she understood that Wynn Resorts needed to modernize its governance practices. So long as the majority of board members were tied to Steve Wynn, it was going to have problems with regulators, not just in Massachusetts, but in Nevada and elsewhere. And there was something quite inappropriate about having Steve Wynn’s friends on the board leading the investigation into the sexual abuse charges against him.

The Wynn Resorts board needed fresh thinking. It needed younger voices, and more diverse voices. (The company now has four women on the board, up from one. It has no minorities.) It needed board members who could re-evaluate the company’s top executives, most of whom also had long-standing ties to her ex-husband. It needed to modernize.

With Elaine Wynn’s victory, that process is underway. Several other longtime board members have either stepped down or announced that they will not run for re-election when their terms are up. After he received several low-ball offers from rival gaming companies, Maddox decided not to sell the Massachusetts casino after all — though the Wynn name will be removed. The company’s stock has not recovered entirely, but it rose steadily during the proxy fight. Elaine Wynn thinks the company has excellent assets, and that with the right leadership, it can easily weather the fallout of the various investigations into her ex-husband’s behavior. That is what her proxy fight was about.

It is also what makes her shareholder activism different. At 76, Elaine Wynn isn’t thinking about a short- term stock pop, or some clever exercise in financial engineering. Her ego does not require her to go on the board herself, and play the conquering hero. She is thinking about the company’s long-term prospects. She is also thinking about her legacy.

“My mission is to resurrect the integrity of this extraordinary company that is really the capstone of my professional career,” she told New York Times columnist James B. Stewart shortly before the annual meeting. That’s what you call having skin in the game.

Far too often shareholder activists, with their cut-and-
run mindset, can harm a company even as they are enriching themselves. Wynn Resorts’ directors should be thankful that the person who took aim at them wasn’t Carl Icahn or Nelson Peltz, but Elaine Wynn. She is saving them from themselves. Joe Nocera, Bloomberg Opinion