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Biglari Holdings Inc. Message Board

  • kuhndan kuhndan Jul 6, 2010 10:04 PM Flag

    Sardar comp details just filed

    Check out the SEC proxy statement just filed with the details on his incentive comp plan. I don't get it. Vote is August 13.

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    • Well he is laying out his case for why he should become a billionaire at the expense of BH shareholders.

      He shows a table that shows that BH stock price has appreciated more than any of its peers (123%) yet his compensation at an average of $621k over the past 2 years is lower than the CEO's of the other companies.

      Several problems with this analysis.

      First, he says that book value per share, not stock price, is the best metric to use to gauge performance, yet he uses stock price to justify his salary. This is convenient because book value increased only about 3% during this time and that would look a lot less impressive than 123%.

      Second, many of the "peer" companies are much larger than BH, for example Chipotle which has a market cap 11x higher and has nearly 3x as many locations. So he wants to be paid on par with companies 10x as large.

      Third he lists his compensation as averaging $621k over the past 2 years, when his salary is currently $900k which obviously misrepresents the current situation. The reason for this low average is that he was in his position for a fraction of 2008. This also does not consider the millions in compensation he has received from Biglari Capital and Western Sizzlin' at the expense of BH shareholders. He mentions the $1 that he received for the sale of Biglari Capital, but does not mention the ~$4.2 million that he received in that transaction from the performance allocation.

      Fourth in the list of adjustments to book value that do not affect his compensation, he did not mention issuing new shares of stock. This is a way of increasing book value that has nothing to do with building the business and gives him an easy way to make money from shareholders.

      Fifth he does not list the many conflicts of interest remaining with his ownership and control of various investment vehicles besides BH.

      Sixth he shows another table showing that for example an 11% increase in BH book value would lead to compensation for Biglari that is average (49th percentile among peers). Forgetting for a moment the question of whether or not these peers are really peers, what this table doesn't consider is the effect of compounding. If BH grows book value at 11% for 10 years -- below average for a US corporation -- in 10 years, Biglari's compensation will go from $4.9 million to $11.2 million during that time. Maybe the average restaurant CEO will be earning $11 million per year in 10 years but that seems outrageously high compensation that delivers below average returns to shareholders. Note that if BH earns 11% per year, shareholders only see 9.5% per year.

      I hope that shareholders are not foolish enough to swallow this load of crap and will instead vote down what is one of the most outrageous compensation schemes I've ever seen.

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