Elaine Wynn loses fight to stay on board of Wynn Resorts

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

Elaine Wynn lost her fierce campaign to keep her seat on the board of Wynn Resorts today after stockholders voted in favor of two candidates endorsed by the company.

Stockholders gathered this morning in the Encore Theater for their annual meeting, at which preliminary election results showed they chose John J. Hagenbuch and J. Edward Virtue to fill the board seats up for election. Final results won’t be revealed until an independent inspector certifies them.

Following the meeting, Wynn Resorts issued a statement thanking Wynn for her service to the board, where she had been a director since 2002.

The company also reiterated its promise to add “one or more qualified, diverse and independent directors” to the board by the end of the year. The company said that is a “key step in our ongoing effort to enhance the board’s independence, broaden the skills and experience of the board and increase its effectiveness.”

Diversity was a key issue raised by Wynn’s campaign to remain on the board, as she was the last female board member.

Wynn said in her own statement that she was disappointed by the outcome of the vote, but she was optimistic she had been an “agent for change and improvement” when she challenged the board’s decision not to renominate her.

“I am gratified to hear from so many investors that this proxy contest was a success in that it brought to light critical corporate governance concerns at Wynn Resorts such as independence, expertise and diversity in the boardroom,” she said in her statement.

“It remains to be seen if the directors of this company will deliver on the commitments they have made to greater independence, diversity and oversight of management. I, however, as the third-largest stockholder, remain committed to holding all accountable, and will now do so from a position of greater strength,” she said.

The preliminary results were announced minutes after this morning’s meeting began. CEO Steve Wynn, Elaine Wynn’s ex-husband, spent much of the remaining time answering questions from stockholders about matters unrelated to the election.

But one stockholder, Ellyce Rumick of Deerfield, Ill., emphatically told Steve Wynn that she was upset about his ex-wife’s removal from the board, eliciting some applause from the audience. She said she felt Elaine Wynn deserved to stay.

“Thank you,” Steve Wynn said to Rumick when she was done speaking. He didn’t elaborate.

Rumick said in an interview after the meeting that she felt strongly about Elaine Wynn’s longtime service to the company and the fact that she was the only woman on the board.

Hagenbuch, Virtue and Wynn all were incumbent directors, but only two were able to continue their service because when the board chose to oust Wynn, it reduced the number of available seats from three to two.

Elaine Wynn, who’s also a company co-founder, launched her campaign almost immediately after the board said it wouldn’t renominate her. In the weeks since, she and the board have consistently traded attacks as they sought to win the favor of stockholders before today’s meeting.

Central to the company’s justification for kicking Wynn off the board is a stockholders agreement between her and Steve Wynn. She sued years ago in an attempt to eliminate the agreement, which limits her ability to sell shares.

While she said the ongoing legal dispute was simply a disagreement between two stockholders, not a board issue, the board strongly disagreed. It argued that her interests in the lawsuit had interfered with her ability to be effective in the boardroom.

Moreover, the board said, if she were permitted to sell more shares, a provision could be triggered that could force the company to refinance debt under less favorable terms.

Put another way, the board said Wynn’s personal goals had superseded her responsibility to look out for the best interests of the company. That message appears to have resonated with many stockholders.

Elaine Wynn, meanwhile, maintained that she was a critical and independent voice on the board that needed to remain. As the company’s third-largest stockholder, she said her interests were inextricably linked to those of all stockholders. She indicated that she had no plans to sell enough shares to lose her control over the company.

She also argued that she had made numerous, important contributions to Wynn Resorts over the years and had developed a wealth of expertise unmatched by anyone aside from her ex-husband. And she repeatedly lambasted the company over the fact that removing her leaves an all-male board, a lack of diversity she described as “appalling.”

After she raised the point about gender, Wynn Resorts promised to boost board diversity this year.

Amid all the back-and-forth between Wynn and the company over the course of the campaign, three advisory firms issued three different recommendations about how stockholders should vote. Glass, Lewis & Co. supported the board’s nominees, and Egan-Jones backed Elaine Wynn. Institutional Shareholder Services suggested stockholders send a strong message to management by withholding support for all nominees.

Institutional Shareholder Services cited deep concerns about Wynn Resorts, writing in a report that it appeared Elaine Wynn and the board all tolerated “weak governance practices, poor pay practices” and “an overall corporate governance profile that ranks among the worst, not the best, of U.S. companies.”

All the points brought up in the campaign weighed heavily on the mind of stockholder Frank DiMartino, who traveled to the meeting from Westchester County, N.Y., with his wife, Janet.

In the end, DiMartino, a small stockholder, said he decided to abstain from the vote because he couldn’t decide which way to come down on the boardroom drama.

“You don’t know what goes on behind the scenes in terms of what she did to make them angry,” DiMartino said.

Gaming

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