Monday, November 3, 2008

Penn National Gaming

Penn National Gaming owns and operates gambling facilities, (including racetracks) -- operating in 14 of the states of the US and in the province of Ontario.

Just last week it issued 12,500 shares of preferred stock to raise $1.25 billion. It had to raise that money in order to get out of a contract to be acquired by Fortress Investment Group and Centerbridge Partners -- a deal that was drawn up in the summer of 2007, and thereafter unravelled as have so many others during this credit crunch.

PNG holds its annual stockholders meeting on November 12. The management will ask stockholders to approve its long-term incentive compensation plan. There will be some opposition to this.

Indeed, at last year's meeting stockholders voted against a similar plan, which as this year involved seeting aside a substantial chunk of the issued equity for awards of various sorts to both employee and non-employee directors. One of the proxy advisory groups, Proxy Governance, has said that that vote reflected "a level of shareholder opposition infrequently seen."

This year the board's compensation committee is saying, in effect, "if the shareholders don't approve this set-aside, we'll just have to incraese the honchos' compensation with larger cash salaries."

As threats go, that's pretty lame. If shareholders are ticked off at management, they'll express this in the manner available to them.

Proxy Governance's report also makes the case that the compensation to these honchos is already high relative to the compensation of directors in comparable firms.

Personally, I'll be pulling for another rebellion in the ranks this year.

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