Point of clarification: Biglari's incentive compensation is based on the increase in book value (BV) of BH not Biglari Capital. In fact he gets 25% of the increase in BV after a 6% hurdle. At that point he is required to spend 30% of his incentive compensation on open market purchases of BH stock within, I believe, 6 months of receiving the compensation.
Huh? I didn't say anything about how his incentive comp was calculated.
BH entered into the incentive comp agreement IN CONNECTION with the sale of Biglari Capital to BH. In other words, if the incentive comp didn't pass the shareholder vote, Biglari would not have sold Biglari Capital to BH.
Therefore, you should look at the incentive compensation as the cost of buying Biglari Capital.
All I'm doing is looking at the costs/revenue of the Biglari Capital transaction. Last year, the "revenue" from Biglari Capital was $36,000 and the "costs" were nearly $4 million.
And what he spends his incentive comp on is a red herring. Who cares if he has to buy shares? If that's such a great thing, then why don't the shareholders just give him 100% of the earnings with the caveat that he has to spend all of it buying shares?
From the latest Q..."General and administrative expenses increased from $11,014 or 6.9% of total net revenues in the first quarter of fiscal year 2011 to $13,258 or 8.0% of total net revenues because of our efforts to franchise the Steak n Shake concept, the accrual of the incentive compensation costs..."