Biglari Holdings Amends Compensation Plan

[Guest ValueCarl]

Based upon not having an unlimited number of assets at his disposal, how does he do what you're saying indefinitely without performing during the process? I don't see that as a risk, nor do I think this type of character would look to sit back on his laurels unless his wings were clipped so badly that he has become indifferent towards creating his own wealth beyond "personal income," a very taxable bucket. 

 

<All Sardar has to do to get his $10 million/year is to monetize assets that are currently carried on the books below book value.>

[shalab]

Book value increased by 19.x% from 1992 to 2007 at SNS. While the book value increased, the company did poorly with capital allocation. If the previous managers had followed this strategy, they would have been immensely rich.

 

As Munger said (paraphrasing), "Show me the incentive, I can tell the man's behavior" - this incentive structure is not aligned with shareholders. This is definitely better than the previous iteration of this plan and we all knew it was going to come back.

 

He is already getting paid for being the CEO. He should get paid for managing the assets separately. This is where the incentive agreement should come in.

 

Furthermore, with the current CEO/BOD, there are questions about when this will be updated to remove the caps. I dont think Biglari can make more than 10million at the moment on a per year basis even under the best circumstances. I peg his compensation at around 8million with the old scheme which will not hit/test the cap.

 

cheers!

 

 

[redskin]

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.

 

I agree.  He could sell real estate that was bought 30 years ago and is currently on the books at cost.  This would increase book value and line the pockets of Sardar without him adding any value. 

[Guest ValueCarl]

Yes, he could also sell the Texas vacant land as well as other West assets which he brought onto the new balance sheet resulting from his prior work, couldn't he?

 

I see the shareholders quandary here, over the way this compensation package must occur. 

 

In its simplest form, he believes he will be the Supreme Creator of shareholder wealth, but not gain sufficient wealth himself for successful capital allocation as a result of a CEO salary insufficient for him to buy externally a large enough chunk of the company as values progress. This resides in the fact surrounding his somewhat small personal ownership stake of the whole at its onset. 

 

Not that one should compare this starry eyed capitalist to Buffett any longer, but Buffett's start in the public domain had been established with him already in a control position and largest percentage owner, as I recall, after the partnership had been dissolved. 

 

If someone can grow these assets better, shareholders really wouldn't need him, right? That's certainly a question that should continue to be asked for a definitive answer.   

 

Maybe the comp package to meet his needs and the needs of his shareholders should include exploring "stock grants" to accomplish "percentage control" benchmarks with a cap at 51 percent over time, instead of cash from out performance fees? Are there enough B's in BH's market cap on the horizon for this to titillate incumbent owners' senses? 

 

If that could be done, by the way, drop his management salary to 200K per year like The Master who he has somehow managed to disrespect because of false pretense along the way!  ;D 

[Parsad]

Article on the package:

 

http://www.ibj.com/biglari-adjusts-controversial-pay-proposal/PARAMS/article/22632

 

Unfortunately, shareholders are damned if the do and damned if they don't on this vote.  If they vote no, then the committee moves ahead with a future performance-based compensation plan that won't be tax deductible according to the filing.  If they vote yes, then they've conceded to the compensation plan with a small adjustment to the hurdle and a cap at $10M, plus the already approved $900K salary that was granted earlier...as well the existing board remains intact.  I suspect this thing will pass.  Cheers! 

[bablu]

from the article ...

 

"The Company views its shareholders as true partners in the business and wants their questions and suggestions to be considered fully, clearly, and accurately," the filing says

 

what a sh**t load of BS ...

 

[Partner24]

We still live in a capitalist system. Shareholders are the ultimate owners of a company.

 

They decide who will be on the board of directors. If the board does not his job properly and don't slap the fingers of a greedy CEO who speak left, but walk right, they can show the exit doors to the board members and chose a more appropriate CEO. That's their right, but no one will force them to use it.

 

I'm surprised that no one like Gabelli has made some noise by proxy over the Sardar case so far. It would be a very easy target...far more easier than what Sardar done with the past BOD.

 

 

 

[manualofideas]

Sorry, this has nothing to do with the Biglari comp discussion, but I just noticed a hilarious banner ad at the bottom of this page.  It said, "The Dollar Goes Down.  The Euro Goes Up - You Profit Either Way!"  I wonder what genius came up with that one.  ;D

[PlanMaestro]

Sorry, this has nothing to do with the Biglari comp discussion, but I just noticed a hilarious banner ad at the bottom of this page.  It said, "The Dollar Goes Down.  The Euro Goes Up - You Profit Either Way!"  I wonder what genius came up with that one.   ;D

 

Hilarious, probably the result of a committee. An individual would not put his name on that..

[Guest Bronco]

Partner - in theory, of course, you are right.

 

However, in practice, I would argue that so many stocks are owned by mutual funds that may have 50-100 stocks.  Their (mutual fund owners) participation potentially could be limited.  Tack on the ETF's.

 

In any case, I find there is a huge disconnect between owners--->boards----->management.

 

Just my opinion.

 

 

[biaggio]

Billionaire Gets Richer Riding Beyond The Efficient Frontier

 

http://www.forbes.com/2010/10/01/high-frequency-trading-intelligent-investing-baron.html

 

"When you were talking about finding the right opportunity, you also seem to put an emphasis on management. How do you evaluate a management team, and how much does a company's team influence whether you invest in it or not?

 

It's everything. You have to find someone who you think will be a good steward of the capital that you've entrusted with him to manage. But if you have someone who's really, really smart and you don't care for them and you don't trust them, that's a really bad combination. So you have to bet on people, and a lot of people we invest in are entrepreneurial. So people are everything, and how do you value them? You do it your whole life. You do it from the time you're in grade school about who you want to be friends with and who you trust and who you think is the smartest kid in class. So everything is about, "Do you want to be friends with this person? Do you trust them? Do you think they're ethical? Do you think they live up to their word? Do you think they live up to their promises?"

[Guest ValueCarl]

Outside of mutual funds, and certain institutions with clout, who maintains sufficient votes to empower Biglari to have his way as he has continued to all along? There has been reference to affluent family members and extensions thereof, which support him. If I am not mistaken, the Persian Prince has been the benefactor of Persian and Oriental rug sales over time. There's a hell of a lot of profit in that! 

 

It could be speculated that some of his arrogance is derived from his belief that, he should become "Royalty" again. 

 

http://www.cmaj.ca/cgi/content/full/169/7/681#F116

 

Biglari travels to Omaha from his home in

San Antonio to oversee the Cyrus Persian Rug

business he set up at Allen Furniture. His

m o t h e r’s family began an oriental rug business

in Iran in 1914. “My father was with the Shah of

I r a n ’s regime when the revolution began in

1979,” Biglari said. His father fled to the United

States in 1984. The family set up a retail

business in San Antonio 17 years ago.

 

 

 

 

[Guest ValueCarl]

So, knowing that you don't have a second Buffett spearheading this investment vehicle now called BH, you probably have some form of Aladdin; however, this Aladdin may have always been loyal to "The Sorcerer," the man who claimed to be the brother of Aladdin's deceased father.

 

In the fictional story, Aladdin's good wife was duped into giving up the lamp. I have always cautioned how wives, good or bad, could derail the best capital steward's most earnest intentions.    

 

By the way, has anyone seen Sardar flying around on Oriental or Persian rugs lately?  "Follow the Yellow Brick Road." :-)    

 

http://en.wikipedia.org/wiki/Aladdin