Corporate Governance Study: Gaming Boards


As published in the Casino Journal, Nov 19 2020

Thanks to a set of diverse financial factors such as COVID-19, ISS, SEC, short sellers and activist investors, it is an absolute pressure cooker for anyone in the public markets today.

This anxiety might be even greater for casinos and the travel/entertainment business as a whole—there, companies have been at the forefront of the COVID response, and the financial stakes have been incredibly high. When it comes to the casino industry, it’s fair to wonder if the corporate governance structure of many gaming companies can withstand the pressure.

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:

  • Board size and makeup;
  • Committee structure;
  • Related party transactions;
  • Evaluation and shareholder communication; and
  • Board and executive pay.

This year, the top performing boards belong to GVC Holdings, Flutter Entertainment and VICIProperties, with each tallying 44 out of a possible 46 points, which is truly an impressive performance by each of these organisations. One of the keys to their high scores was the issuance of proxy information that was thoughtful, thorough and easy to understand—just what investors and advisors are looking for.


In determining the effectiveness of the size and makeup of a company’s board, we looked at six attributes: total number of board members, length of term, the chairman’s background, the presence of a lead director, ratio of insiders and outsiders on the board, and the board’s diversity policy.

Total number of board members: A board should be comprised of an odd number of members between five and 11; a range that most experts consider to be optimal. Only nine of the 33 companies in the industry had an even number or had a board that was too big or small. A vast improvement over the 17 in our study two years ago.

Length of term: Having staggered board terms is a governance no-no. Each board director should stand for re-election annually. The only reason to have staggered terms is to prevent proxy battles with investors, which is not the best way to build a relationship with the owners of a company. Twenty-one companies had one year terms, while the remaining 12 had multi-year terms.

Chairman characteristics: Most governance experts believe that the chairman and chief executive officer (CEO) roles should be separated. In today’s environment, the chairman should be independent of the company and a balance to a strong CEO. The separation of powers is a cornerstone of our democracy and it should be the same for public companies. Eighteen casino companies had their CEO as chairman or had an inside chairman. Only 15 had a truly independent chairman.

Lead director: When a board allows an insider to be chairman, they should at least appoint a lead independent director. Fourteen companies appointed a lead director, including GVC, Flutter and MGM Growth, which had both a lead director and an independent board chairman.

Ratio of insiders and outsiders: Boards should have a super-majority of independent board members. Seventeen gaming boards had a super-majority, while the remaining 15had an abundance of insiders on their boards.

Diversity: Companies received points by having a formal policy around gender and racial diversity. Beyond being a social responsibility in today’s environment, it is just good business practice. A diversity of background and opinion can only help inboard meetings. Six companies had both gender and racial diversity, while five had multiple women sitting of their boards. Unfortunately, most gaming boards are still dominated by old, white men. This needs to change.


Committee structure: The SEC requires public companies to have the following four committees: audit, compensation, governance and nominating. The committees should have official charters, no executive committee, and be made up of solely independent directors. Less than half of the group (14) scored perfectly in this metric.

Transactions with related parties: We continue to see problematical related party transactions taking place, with 19 companies having some form of the practice. This seems like an easy x, but most continue to do it. Appearances do matter and advisory services such as ISS are not turning a blind eye.

Evaluations and communication: Issues concerning the effectiveness of internal board operations, director evaluation and accessibility to shareholders were measured in this section. Much like our next section, we like to see companies study the competition to make sure shareholders are happy, feel engaged, and are confident in board strategy. Eight companies scored perfectly in this category, up from six in our previous study.

Pay for performance: The final area of our survey is a hot button topic, CEO and board pay. So much has been made about the pay inequality between the CEO and the average worker. Dodd-Frank regulations now require companies to delineate CEO pay ratios and say-on-pay votes. This trend is only going one way— more transparency in the way CEOs get paid. In our opinion, the issue is not about how much CEOs are paid; it is about whether they earned their pay. In fact, we conducted a CEO pay-for-performance study with Casino Journal in last month’s issue that showed a growing number of gaming executives have performed well enough to claim that they truly earned their compensation.

That said, the industry is making strides in this area of governance with 13 companies having perfect or near-perfect scores.

Boards will be dealing with the effects of COVID for years to come from capital, environmental, social and operational perspectives as well as a myriad of other issues. Most board members we speak with are working double the hours, while taking pay cuts. While few are feeling sorry for these leaders during this crisis, those who continue to pour maximum effort into the job will demonstrate who got it right and who got it wrong when it comes to the makeup of their boards.