Analysis | Wynn Resorts’ next battle: Friends of Steve who remain on board

Elaine Wynn, ex-wife of Steve Wynn, listens during a hearing in Las Vegas

Steve Wynn may be gone from the casino company that bears his name, but he still has friends in high places, including the chairman of the board.

D. Boone Wayson took over as chairman of Wynn Resorts Ltd. in February after Wynn stepped down, a shake-up spurred by reports that Wynn sexually harassed female employees over decades. The Wynn and Wayson families go way back, to a bingo parlor operated by Steve and Boone’s fathers in the 1960s.

Now those longstanding ties may become a liability for Wayson and other so-called legacy directors. Steve Wynn’s ex-wife Elaine, who has become the company’s largest individual shareholder, made it clear this week that she intends to go after board members who were close to her former husband.

To start, she is withholding her votes for John Hagenbuch, a director since 2012. He sits on the company’s compensation committee and the special committee of the board investigating the allegations against Steve Wynn. Hagenbuch is a real estate investor from Ketchum, Idaho, near where Steve Wynn has vacationed for years.

“I am deeply concerned by what I view as the lack of independence and responsible oversight demonstrated by the current board of directors,” she said in a letter to shareholders on Monday. “My opposition to Mr. Hagenbuch’s re-election serves as a referendum on all of the longstanding legacy directors.”

In response, the company noted that it has added “three new experienced and distinguished directors” since Wynn’s departure. Neither the company nor any board member is providing information to, or accepting information from, the former chief executive officer, according to an e-mailed statement. Wayson “is an experienced, seasoned and accomplished gaming and real estate professional and the right person to lead the refresh of the board,” the company said.

Wynn Resorts has implemented many changes since Steve Wynn stepped down two months ago. Three longtime board members have left the company or announced plans to retire. And the three new directors, appointed last week, are all women. That means four of the company’s 10 directors are now women, well ahead of the 23 percent average of Fortune 500 companies, according to the corporate research firm Equilar Inc.

Among those not on the board: the company’s new chief executive officer, Matt Maddox. That puts him in the minority among CEOs of large corporations.

“The board believed that it was important to appoint independent and diverse directors as a first step,” Wynn Resorts said in a statement. “As we move forward to further strengthen the company and board, we anticipate adding additional directors this summer including insiders.”

Elaine Wynn is opposing Hagenbuch because his term on the board is up at this year’s annual meeting, slated for May 16 in Las Vegas. Under the company’s current rules, he’d serve until 2021 as part of Wynn’s staggered board – a situation she would also like to change.

Among her other complaints, Maddox’s compensation of USD24 million is “exorbitant,” and a possible sale of a still under-construction casino near Boston, which the CEO has said he is contemplating, is “short-sighted.”

In an April 19 letter to Elaine Wynn, Wayson said that the deadline for nominating directors had passed. The board didn’t see fit to reopen the process, he said, but would “look forward to engaging with you constructively in the future.”

The Wayson and Wynn families have a long history. After Steve Wynn’s father Michael died unexpectedly in 1963, Steve Wynn stepped in take over the bingo hall near rural Lothian, Maryland, that was co-owned with Edward Wayson Sr., according to a 1981 casino filing in New Jersey.

Steve Wynn used cash from the bingo operation to begin his legendary rise in Las Vegas. D. Boone Wayson, 11 years younger than Steve, tagged along for much of it, working with the casino mogul at the Golden Nugget casinos in Las Vegas and in Atlantic City, New Jersey, where he served as president.

Wayson was involved in one of the more colorful moments in Wynn’s career, when an alleged drug trafficker named Anthony Castelbuono, aka Tony Cakes, came in to gamble at the New Jersey resort. Wayson was questioned by federal regulators about his contact with the gambler, but his conduct was not an issue, Massachusetts officials concluded.

The relationship between Wayson and Wynn could still play a role in the company’s future. Regulators in Nevada, Macau and Massachusetts are investigating the allegations of sexual harassment, including questions of what other Wynn executives and board members knew about the behavior.

On April 12, the Massachusetts Gaming Commission declined to immediately remove Steve Wynn’s name from the company’s gambling license, despite his having left the company and sold all of his shares.

Commission Chairman Stephen Crosby said he wanted to make sure the former CEO won’t have any “residual influence” over Wynn Resorts. Through a spokeswoman, the commission declined to comment on Wayson’s ongoing role at the company, saying it’s preparing for an upcoming hearing on Steve Wynn’s license status.

Anne Sheehan, who formerly ran the corporate governance program at the California State Teachers’ Retirement System, said it would be difficult for a company the size of Wynn Resorts to replace its entire board at once. Sheehan said she recommended one of the new members, author and former executive Betsy Atkins, to the Wynn board.

“This is a good first step,” Sheehan said in an interview. “I’m confident we’ll see additional changes with some of the long-tenured board members.”

Hal Shear, a management consultant who said he is friends with gaming commissioner Crosby, said the ties between Steve Wynn and current board members such as Wayson are worth examining.

“You’d like to see as few entanglements as possible,” Shear said in an interview. “The fact that he knows the person from long ago needs to be looked at in the context of the recent past. Do they vacation together? Do they have houses next to each other? Do they do anything that creates any conflicts of interest?” Christopher Palmeri, Bloomberg