Thursday, June 01, 2006

Just as the biggest gaming companies grew through consolidation last year,
executive pay packages also fattened, reflecting larger responsibilities and
record corporate profits. As they have in the past, casino bosses topped the
list of the highest-paid executives in Las Vegas in 2005. The Sun's sister
publication, In Business Las Vegas, compiled the list, using publicly
available proxy statements. The entire list will be published by In Business
in its June 2-8 issue. Salary analysts say shareholders are not balking at
executive compensation because it is justified by corporate performance.

Topping the list:

Station Casinos Chief Executive Frank Fertitta III ranked first for the
second year in a row, earning $5.7 million in short-term compensation and an
additional $37.1 million in long-term compensation from the value of stock
options he exercised last year.

Short-term compensation includes annual salary, bonus and the value of other
perks such as fitness clubs, country club memberships and the use of company
vehicles. Long-term compensation can also include awards of restricted
stock, which is stock that can't immediately be sold.

In 2004 Fertitta received a large chunk of restricted stock and $75.4
million from exercised options, but didn't receive any restricted stock last
year.

Bobby Baldwin, chief executive and president of MGM Mirage's Mirage Resorts
division, earned $6.1 million in short-term compensation and $32 million in
long-term compensation, which propelled him forward from his 28th position
last year to second place. (Like some of the other executives, Baldwin also
received other compensation, making his total pay greater than the sum of
his short- and long-term packages.)

Boyd Gaming Corp. Chief Executive Bill Boyd ranked third with $3.8 million
in short-term compensation and $34.1 million in long-term compensation. He
was No. 4 on the 2005 list.

MGM Mirage Chief Executive Terry Lanni advanced from fifth to fourth with
$8.8 million in short-term compensation and $21.9 million in long-term
compensation.

John Redmond, chief executive and president of the MGM Grand Resorts
division of MGM Mirage, ranked fifth with $6 million in short-term
compensation and $23.3 million in long-term compensation. Last year he
ranked 12th.

Anthony Marlon, chief executive of Sierra Health Services, was the
highest-compensated nongaming executive in Las Vegas and ranked sixth, with
$3.4 million in short-term compensation and $15.7 million in long-term
compensation.

Other executives in the top 10 were Station President Lorenzo Fertitta,
Shuffle Master Chief Executive Mark Yoseloff, Wynn Resorts President Ron
Kramer and Station Chief Development Officer Scott Nielson.

Among the other top Strip moguls, Harrah's Entertainment Chief Executive
Gary Loveman ranked 14th, Steve Wynn ranked 19th and Venetian owner Sheldon
Adelson ranked 28th.

Loveman, who leads the world's largest gaming company, earned a hefty salary
and bonus of $5.9 million and exercised options worth $3.9 million - less
than some of his peers. Wynn reported $6.1 million in short-term
compensation but didn't receive any stock last year, nor did he exercise any
stock options. Adelson's compensation was also mostly reflected in his
salary and bonus of $3.6 million.

Among top executives, annual salaries and bonuses rose last year, with
executives cashing out tens of millions of dollars worth in stock options
that rose significantly in value in recent years.

Analysts say one-year snapshots of executive pay are misleading because they
may include options executives have held for many years and that are due to
expire. Executives are often encouraged to cash out options within a few
years of expiration to reduce investment risk.

Like many companies, Station Casinos uses a compensation consultant to
advise its board members on appropriate salaries for executives.

Station's top executives are among the highest paid in the business. They
are also highly compensated relative to other industries and the company's
size.

"We have an experienced, cohesive management team in place that has allowed
us to grow the company and maintain our performance," Frank Fertitta said.
"We're out there every day competing for talent."

The company's stock - up about 13 percent from a year ago - has been a top
performer in recent years, pre-empting any backlash from shareholders or
Wall Street over executive compensation.

At the company's annual meeting Wednesday, Station stockholders praised the
management team for posting the highest profit margin and return on capital
within the casino industry.

Hefty pay packages in other industries such as health care and technology
have been thrown into question in recent years after dips in company
performance.

But that has not been an issue in the casino business, which is rolling in
record profits and benefiting from unprecedented investor interest.

The bonus potential for casino executives is hitting an all-time high
because gaming companies are performing at or better than Wall Street
expectations, said Marc Weiswasser, an executive recruitment expert for Las
Vegas-based gaming management consultant Navegante Group.

Graef Crystal, a former compensation consultant for Fortune 500 companies
and an executive-pay columnist for Bloomberg News, found that at the
country's largest public companies, executive pay was more strongly
correlated with size than performance or any other factor.

But different rules apply when rewarding gaming executives, consultants say.

Jack Marsteller, a principal with global management consulting firm Towers
Perrin in Los Angeles, said directors have little choice but to keep pace
with rising salaries for executives at top performing companies.

"That's not a choice a director has unless you're willing to take the risk
to lose the talent," said Marsteller, who has worked with casino companies.

"The primary determinant of pay is the ability to create return for
shareholders," Marsteller said. "The gaming stocks are red hot and companies
are expanding. These executives are creating wealth for shareholders."