Penn National Gaming: Jackpot Pay not Much of a Gamble
Annual meeting June 7, 2022
Total compensation of Penn National Gaming’s Jay Snowden for 2021 was $65,887,214. An astonishing amount for any CEO. The vast amount came through a stock award of over $53 million dollars. The award has a stock price hurdle that requires significant shareholder value creation before it would pay at maximum. In addition, the company must sharply outperform the S&P 500 (be in the top 25th percentile of TSR percentile in order for it to vest.
In addition to this award, Snowden received a 28.6 percent increase in base salary, from $1,400,000 to $1,800,000. As I have noted before, unjustified increases in salary inflate pay not only at the particular company (where multiples of salary are typically used in plan design), but at other companies as well since they have a significant ratcheting effect among peer groups. In Snowden’s case the bonus paid out at 375 percent of his base salary, or $6,750,000.
Snowden’s package stands out compared to that of the other named executive officers (NEO). The next highest paid executive received $4,325,414. Many institutional investors have as part of their guidelines a suggestion that it is a red flag for the CEO to be paid too much compared to other executives within the organization. It is normal to have some gap, but the concern is that too much differentiation may discourage retention within the executive suite. Many guidelines vote against pay packages where the CEO makes more than three or four times the average NEO. In this case, the CEO’s payment is more than 15 times the next highest executive.
It is also worth noting that none of the other NEOs listed in the summary compensation table were officers last year. This sort of turnover is of concern to shareholders.
The company notes that “the median of the 2021 annual total compensation of all of our employees (excluding Mr. Snowden) was $33,930, and the ratio of these amounts was 1,942 to 1. Based on Mr. Snowden’s 2021 regular annual compensation (excluding his supplemental performance-based equity award) of $17,194,864, the ratio was 507 to 1.”