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Biglari Holdings Amends Compensation Plan


Parsad
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The compensation plan now has a hurdle of 6% and is capped at $10M.  Thanks to Shane for informing me of the filing!  There is also clarification by Sardar on how the compensation plan would operate.

 

http://www.sec.gov/Archives/edgar/data/93859/000092189510001420/def14a07428_11052010.htm

 

I think if Sardar wants to make up with shareholders, he should probably add two large ones to the board.  I think somebody from Oakstreet Capital and maybe Gabelli.  The existing board did not do their job adequately and actually did harm to the company, it's reputation and shareholders.  This compensation plan was not thought out properly, nor instituted in a shareholder-friendly manner.

 

The other concern that shareholders may have is if this plan is accepted, can the company amend it five years from now and make it insanely lucrative once again?  Or is the compensation plan permanently capped at $10M?  Cheers!  

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As I have said in the past, I think that this is a great way to compensate executives. Previously, I just disagreed with the 4%. I would be happier with 8% and no cap, though. To me, the idea of capping what Biglari can make is completely absurd; If he triples book value by some great investment decisions in a single year, I don't see how this is only worth $10 million.

 

Regardless, I don't see why having extra board members is really necessary. Adding, rather than replacing board members would increase the amount of money that the company pays out. Furthermore, it seems that investors going crazy about the compensation package did the job that was necessary, and got the necessary changes made- looking back, we probably should have all bought shares in light of the freak out that market had in regards to the company.

 

Other than some additional filing fees and extra time that the company spent explaining the compensation package, I don't see how this significantly hurt the company. I really doubt that employees cared about it much more than they did before, when he was making $900K. As a side note, the last thing that I would want, is to have another couple of guys who know how to allocate capital, questioning the allocation decisions of the guy running the company; which I am sure would eventually happen with other hedge fund guys on the board of directors.

 

In regards to the reputation, I am guessing that will be repaired in the coming years, at least to people that don't read up on companies... Personally, I just view this as the company losing it's way momentarily. While I personally only own 1 share now (so that I can get stuff in the mail, annual coupons, and the chance to attend a good meeting :]) I am a lot more apt to buy shares in the company again.

 

Remember, the guy never claimed to be Buffett. ;P

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Sanjeev,

 

Have not read it completely but

 

"In addition, to ensure that the Company’s shareholders have an opportunity to review and approve material changes to the Incentive Agreement, the Incentive Agreement has been modified to require shareholder approval of any future amendments that would materially increase benefits to Mr. Biglari."

 

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As I have said in the past, I think that this is a great way to compensate executives. Previously, I just disagreed with the 4%. I would be happier with 8% and no cap, though. To me, the idea of capping what Biglari can make is completely absurd; If he triples book value by some great investment decisions in a single year, I don't see how this is only worth $10 million.

 

I agree.  I would have been happier to see a 10% hurdle and no cap. 

 

Regardless, I don't see why having extra board members is really necessary. Adding, rather than replacing board members would increase the amount of money that the company pays out. Furthermore, it seems that investors going crazy about the compensation package did the job that was necessary, and got the necessary changes made- looking back, we probably should have all bought shares in light of the freak out that market had in regards to the company.

 

I had no intention of adding directors from my comments.  I would want to replace two of the boardmembers with existing large shareholders.  They failed at their job, and if I was a shareholder, I would have no need or desire to pay the existing boardmembers for their services.  A couple of them need to go!

 

Remember, the guy never claimed to be Buffett.

 

This argument doesn't wash with me.  Do we get the management we deserve, or do we earn the management we deserve?  I think it's a little of both.  Not only should executives be their own compliance and ethics officer, shareholders have to be demanding of them to act in such a manner.  Shouldn't all executives, as well as all of us, aim for lofty objectives?  Or is "just ok" good enough these days?  Cheers!

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But please, please, please, Sanjeev, do not settle, encourage or offer support for Gabelli on that board! One excessively greedy man who is working more closely together with a most greedy peer, will only encourage more greed!  

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This is a nod to obvious shareholder disappointment, but it does not change what has been shown about Mr. Biglari's temperament, judgment and tone-deafness.  How likely is he to execute the long range plan of keeping excellent managers with a personality that is all about him? 

 

He has had his "naked moment" and there's really no coming back from that, at least for me.  Same is true for Cooley and the Board. 

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I strongly oppose the new compensation plan.

 

BH had a stated equity at July 7, 2010 of about $242 million. The market cap today is about $475 million. Maybe the company could be sold for $550 million. Under the proposed new compensation plan a big chunk of the $300 million difference between current book value and current fair market value would belong to Sardar when and how he chooses to harvest it.

 

I think that the amended compensation plan should be defeated and the company should be sold without Sadar getting any of the difference between current book value and current fair market value. That way he will be making money with us, not off us.

 

Then Sardar can do something with a different company and those of us who want to invest with him can, knowing more now than we did then.

 

 

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This is a nod to obvious shareholder disappointment, but it does not change what has been shown about Mr. Biglari's temperament, judgment and tone-deafness.  How likely is he to execute the long range plan of keeping excellent managers with a personality that is all about him?  

 

He has had his "naked moment" and there's really no coming back from that, at least for me.  Same is true for Cooley and the Board.

 

You wrote it better than I would have done it myself. Simple, clear and quick. Thank you RRJ for saving me some time ;D

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Biglari only holds $3,000,000 worth of stock? Doesn't that seem kinda small?

 

http://www.sec.gov/Archives/edgar/data/93859/000092189510001206/sc13g07428007_07282010.htm

 

 

9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 

3,623,668

 

That's the number of shares.

 

From my calculations, that would be about $1,184,939,436. That's more than twice what the company is worth.

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Is the investment management business worth anything if Biglari sells to the company?  Why would an individual investor invest in the Lion Fund?  Won't most investors simply redeem their investment in the fund and invest in BH if they want Sardar to manage their money?  If that were to happen there are no management fees earned.  Sardar could be selling the company an asset worth nothing in return for this outrageous comp package.

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Biglari only holds $3,000,000 worth of stock? Doesn't that seem kinda small?

 

http://www.sec.gov/Archives/edgar/data/93859/000092189510001206/sc13g07428007_07282010.htm

 

 

9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 

3,623,668

 

 

That's the number of shares.

 

From my calculations, that would be about $1,184,939,436. That's more than twice what the company is worth.

 

 

 

 

that might before the reverse split

 

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Biglari only holds $3,000,000 worth of stock? Doesn't that seem kinda small?

 

http://www.sec.gov/Archives/edgar/data/93859/000092189510001206/sc13g07428007_07282010.htm

 

 

9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 

3,623,668

 

 

That's the number of shares.

 

From my calculations, that would be about $1,184,939,436. That's more than twice what the company is worth.

 

 

 

 

that might before the reverse split

 

 

 

That certainly make sense to me. I thought it was the dollar amount since there is no way it could be the current share amount with the price where it is currently. If this is before split, it means that he owns about $58 million worth. I think that's also about the size of the Lion fund when I was reading about it.

The link that I posted though does have a date of August 2, 2010. It had the reverse split, before that, right?

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Biglari only holds $3,000,000 worth of stock? Doesn't that seem kinda small?

 

http://www.sec.gov/Archives/edgar/data/93859/000092189510001206/sc13g07428007_07282010.htm

 

 

9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 

3,623,668

 

 

That's the number of shares.

 

From my calculations, that would be about $1,184,939,436. That's more than twice what the company is worth.

 

 

 

 

that might before the reverse split

 

 

 

That certainly make sense to me. I thought it was the dollar amount since there is no way it could be the current share amount with the price where it is currently. If this is before split, it means that he owns about $58 million worth. I think that's also about the size of the Lion fund when I was reading about it.

The link that I posted though does have a date of August 2, 2010. It had the reverse split, before that, right?

 

Yikes guys, the link he gave and the share number he quoted (3.6M) are for his ownership stake in Sonic.

 

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I strongly oppose the new compensation plan.

 

BH had a stated equity at July 7, 2010 of about $242 million. The market cap today is about $475 million. Maybe the company could be sold for $550 million. Under the proposed new compensation plan a big chunk of the $300 million difference between current book value and current fair market value would belong to Sardar when and how he chooses to harvest it.

 

I think that the amended compensation plan should be defeated and the company should be sold without Sadar getting any of the difference between current book value and current fair market value. That way he will be making money with us, not off us.

 

Then Sardar can do something with a different company and those of us who want to invest with him can, knowing more now than we did then.

 

 

 

Sardar has said that the Steak 'n Shake brand is not for sale.

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Biglari only holds $3,000,000 worth of stock? Doesn't that seem kinda small?

 

http://www.sec.gov/Archives/edgar/data/93859/000092189510001206/sc13g07428007_07282010.htm

 

 

9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 

3,623,668

 

 

That's the number of shares.

 

From my calculations, that would be about $1,184,939,436. That's more than twice what the company is worth.

 

 

 

 

that might before the reverse split

 

 

 

That certainly make sense to me. I thought it was the dollar amount since there is no way it could be the current share amount with the price where it is currently. If this is before split, it means that he owns about $58 million worth. I think that's also about the size of the Lion fund when I was reading about it.

The link that I posted though does have a date of August 2, 2010. It had the reverse split, before that, right?

 

Yikes guys, the link he gave and the share number he quoted (3.6M) are for his ownership stake in Sonic.

 

 

Wow. I'm an idiot. I'm so sorry.  :(

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I like Greg's conviction! No doubt Sardar had heard undertones of methods which Greg endorses taking place. Some sharpies here had certainly articulated thoughts like his before.

 

I think those who continue to maintain the greatest influence on this greedy man's destiny, should demand that he raises the benchmark to ten percent!

 

After all, what's four hundred basis points amongst friends?  >:( 

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10% would be OK if the starting value were the fair value of BH, not the book value which grossly understates fair value.

 

All Sardar has to do to get his $10 million/year is to monetize assets that are currently carried on the books below fair value. He can do this year after year even if he never adds a penny of value to the company, even if he destroys value.

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