GAMING INDUSTRY – Articles

Casino Journal and AETHOS Consulting Group have been analysing board practices in the gaming industry for over a decade. The results of our recent survey show some vast improvements; however, there are still several companies that continue to lag the marketplace when it comes to corporate governance structure. Our study examined five critical areas of corporate governance:

The end of 2019 ushered in a banner year. Valuations where high and deals were getting done (Penn National & BarStool, Caesars & Eldorado) among them. Then the world changed overnight. Panic in the public markets ensued and valuations plummeted (Penn National went from $49 to $4 in March). The gaming compensation committees had the challenge of paying 2019 bonuses and such just as COVID was devastating their businesses. A though spot to say the least. Markets have since bounced back and casinos are slowing reopening to a new reality. How gaming companies handle executive pay issues at the end of 2020 will be a very interesting read.

In this our thirteenth annual study of gaming industry pay, we evaluated the performance of 32 public gaming companies in determining whether a CEO deserved his or her pay. The AETHOS pay-for-performance model compares significant financial metrics such as company size (market cap), stock appreciation (rise in stock price over 3 years), EBITDA growth (over 3 years), and total direct compensation (combination of salary, bonus, LTIP & other). Our findings are illustrated below.

Studies in consumer marketing theory reveal that, like human beings, products, services, and locations have “personalities.” Indeed, considerable research supports the notions that (i) brands have human-like characteristics that distinguish them from each other, which make them important to consumers, and (ii) consumers become “engaged” with brands, meaning that they can feel special emotional and symbolic connections with certain brands. Along these lines, it could be argued that the casino-gaming industry is evolving in its brand identity and personality, whether by default or design. Further, this apparent evolution is redefining this consumer market in broad and perhaps even unexpected ways. Let’s use Las Vegas as a case study.

Integrated casino resorts are moving closer to becoming a reality in Japan. While the Integrated Resort (IR) Implementation Bill was passed by Japan’s Diet last summer, it is anyone’s guess as to when the actual licenses, expected to be granted in Osaka, Tokyo, and Yokohama, will be awarded. In addition to one or two local Japanese firms such as Sega Sammy and Konami, the likes of global casino players MGM, Las Vegas Sands, Wynn and Caesars, are all pitching and lobbying furiously to win one of the coveted sites. Forecast to become the second largest gaming market in the world after Macau, and at least twice as large as Singapore, Japan has tentatively edged over the last few years towards legalising casino resorts while at the same time seeking to impose certain limitations in order to appease a nation concerned with the dangers of gambling addiction. Industry and government are making a concerted effort to overturn a negative perception of gaming and to better educate the general public on what exactly an IR comprises. In other words, pitching them as large scale entertainment venues centred on a comparatively small casino - in fact only up to 3% of floor space will be devoted to gaming. The huge amounts of patience, money and resources required on the part of these hopeful casino groups to get this far in the bidding process gives some idea as to the size of the potential payoff that is on offer.

As part of our investigative C-Suite miniseries, which takes a closer look at and profiles the key senior leadership functions at hospitality companies around the globe, AETHOS now attempts to paint a clearer picture of the Chief Marketing Officer (CMO) role and the leaders who define it. Thus far, we have profiled the changing roles, competency sets and backgrounds of the Chief Commercial Officer, the Chief Human Resources Officer and the Chief Information Officer. Arguably, the CMO is another important piece of the puzzle – not yet completing, but certainly providing a much more comprehensive picture of the management teams of hospitality organisations around the globe.

The last eighteen months has been a reckoning for powerful men in the business world and gaming has been no exception. The #MeToo Movement struck down one of the most recognizable names in the gaming industry when Steve Wynn stepped down from the company he founded, Wynn Resorts. These issues have continued to shine a spotlight on CEO pay, severance and golden parachutes. Four other CEOs in gaming are out or on the way out soon. Caesars recently announced that Mark Fissora is stepping down at the end of the year. All that said, it was a very solid year for casinos stocks, with many of the bigger companies outperforming the small ones.

The gaming industry is one of the most regulated businesses in the world. With a colourful past, the industry has gone to great lengths to earn a reputation as “squeaky clean.” But has that translated to the boardroom and corporate governance in general? We think so. Casino Journal and AETHOS Consulting Group have been analysing board practices for more than a decade; rating gaming companies on how well they are organized, managed, communicate with shareholders and pay themselves and executives.

Besides technology, the gaming industry has one of the largest percentages of entrepreneurs running their respective companies. Larger than life personalities such as Steve Wynn and Sheldon Adelson actually cast a shadow well beyond gaming. But that is changing as entrepreneurs are slowly being replace by corporate execs such as Keith Smith at Boyd, Jim Murren at MGM, Tim Wilmott at Penn and Mark Frissora at Caesars. It is interesting to see how CEO compensation has changed as this process has unfolded. Generally speaking, the entrepreneurs took more of the compensation in equity, while corporate executive appear to have a more balance approach to their compensation mix. In the end, what matters most is whether a CEO earns his or her pay, not necessarily the size of the paycheck. In an effort to analyze executive pay in the gaming industry, AETHOS developed a proprietary pay-for-performance model that allows for the comparison of disparate data points to determine if a pay package was too large or small.

Figures from the European Gaming & Betting Association (EGBA) show that the European online gaming and betting market is thriving. [...] Yet, despite the significant size of the sector, online gaming and betting only represented 17.5% of the total gaming market in Europe. [...] Traditional bricks-and-mortar operations will thus continue to generate the bulk of the revenues for the industry. With this in mind, we got in touch with senior casino executives to talk shop.

AETHOS Consulting Group has been expounding on corporate governing practices for more than a decade. Our goal has been consistent; rate gaming companies on how well they are organized, managed and communicate with shareholders. This year’s study included 27 companies that have significant business concerns in the gaming industry.

Pay for top gaming industry chief executives is on the uptick, especially for companies concentrating on international opportunities

The 2013 ranking of gaming’s best boards emphasized diversity, clearing the way for MGM Resorts to capture the top spot.

After a slower than expected recession recovery, the gaming industry is beginning to see signs of optimism, leading towards an economic rebound. The authors present their 2012 review of US gaming CEO compensation for Casino Journal

Based on our pay-for-performance index, in 2012 Joe D'Amato at Empire Gaming was the industry's most underpaid boss or top-performing CEO, depending on your point of view.

The need to show clear Board of Director Independence has sparked a trend to appointing Independent Lead Directors. AETHOS looks at the trend's effect on US gaming companies.

Bonuses way up, stock options way down in the 2007 Gaming Industry CEO Survey by AETHOS.

This review of US gaming company CEOs compares 2010 compensation in relation to stock performance, EBITDA growth and market capitalization over a three year period.

Even with fewer bonuses and stock options, the average CEO salary shot up 16.2 percent in 2003, thanks to a spike in casino business finds our annual US Gaming CEO performance study.

Our annual review of the US gaming industry leadership evaluates the stock performance, EBITDA growth and market capitalization of public gaming companies in the U.S. and compares it with CEO pay.

The 12th annual study evaluates the Best Gaming Boards of 2009. Conclusions are based on analysis of 35 public gaming companies.

US gaming industry's boards in 2005 exercised diversity and discretion in their handling of corporate governance, finds our annual survey of best practices in the boardrooms of US public gaming companies.

There are many effective means available of assessing current and future company executives. Are you utilizing an effective assessment tool? wE take a look at the what, how, and why of executive assessment.