I'm sure many of you are aware of Sardar Biglari. A very successful young businessman who first came to my attention preaching the word of protecting shareholder interest as he fought for control of several poorly managed public companies.
Biglari wrote eloquently and clearly pulled from the words of Warren Buffett who has made a career out of understanding that he is in partnership with his shareholders.
Biglari gained the title of CEO and Chairman of the Steak N Shake chain of burger joints by winning a battle for shareholder support against a bad management team. Shareholders rejoiced as they now had one of them (a partner) to run the company.
However since taking over Biglari has:
- Changed the name of the business to Biglari Holdings
- Gave himself a huge raise to $900k per year
- His board of directors subsequently approved a very controversial compensation scheme that provides him with a large bonus aimed at helping him secure additional shares of Biglari Holdings
- Done two reverse share splits for seemingly self serving reasons
And if you dig into this recent filing you will see that the Board of Directors is also taking care of itself:
http://www.sec.gov/Archives/edgar/data/93859/000092189511000474/def14a07428_04072011.htm
Director Compensation
Directors of the Corporation who are employees or spouses of employees do not receive fees for attendance at directors’ meetings. During fiscal year 2010, a director who was not an employee or a spouse of an employee received an annual cash retainer of $22,000, and the Chairs of the Audit Committee and Governance, Compensation and Nominating Committee received an annual retainer of $37,000. In addition, non-employee directors receive cash meeting attendance fees as follows:
· $3,500 for each in-person Board meeting attended;
· $1,250 for each committee meeting attended in-person not held in conjunction with a Board meeting;
· $500 for each committee meeting attended held in conjunction with a Board meeting; and
· $500 for any meeting (Board or committee) in which the director participated by phone.
From November 2008 to March 2009, we paid all retainers in Company stock. We have discontinued that practice to avoid equity dilution. Effective April 1, 2009, all annual retainers have been paid in cash only.
On December 9, 2010, the Board approved an increase in the annual cash retainer for non-employee directors of the Corporation to $32,000. The Board also approved the payment of a $120,000 annual cash retainer to Dr. Cooley for his role as Vice Chairman of the Board and such other duties as designated by the Board.
The $120k to Biglari's wing-man Cooley is the most stomach turning in this. Back before Biglari had control of Steak N Shake he always presented himself as only being interested in running the company for shareholders. If he was going to get rich it would be through share price appreciation not treating the company like a personal savings account.
The worst part of all of this is that Biglari himself actually controls a piddling amount of BH stock. He would not be hard to displace should shareholders unite. Of course he and his Board of Directors have his backside covered for this as well:
If the option described in the preceding paragraph expires unexercised after three years, and after such time there is a change in control of the Corporation, Mr. Biglari is terminated by the Corporation without “cause” or Mr. Biglari resigns for “good reason,” Mr. Biglari will be entitled to receive a severance payment equal to 299% of the average annual cash compensation (consisting of his base salary and incentive compensation) paid to him since the date of the Incentive Agreement, subject to reduction to the extent necessary so that no portion of the severance payment will be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended.
