Steak n Shake parent postpones meeting amid pay uproar

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The parent company of Steak n Shake has postponed an Aug. 24 meeting in which shareholders were set to vote on a controversial pay package for CEO Sardar Biglari.

In a late Monday announcement, San Antonio-based Biglari Holdings Inc. said the decision to delay the meeting is the result of “misinformation” that the company needs to address. A new date has not been set.

“Biglari Holdings is pleased that to date it has received wide backing in favor of the incentive agreement,” the statement said. “However, misinformation and mischaracterizations of the proposed agreement by certain analysts and investors have generated questions and uncertainty, which the company wants to address for the benefit of all shareholders.”

At issue is a pay package announced in April in which Biglari Holdings said it would begin paying Biglari 25 percent of any increase in the company’s annual book-value growth topping 5 percent.

That means the CEO’s bonus pay would be based in part on asset growth rather than income. The bonus pay would be in addition to the $900,000 annual salary Biglari earns.

The Motley Fool columnist, Richard Gibbons, has called it “one of the sweetest compensation arrangements I’ve ever seen at a public company”—one that would cut deeply into shareholder returns.

Ken Skarbeck, managing partner of Indianapolis-based Aldebaran Capital LLC and a columnist for IBJ, said the pay is too rich for such little growth.

Paying Biglari 10 percent of an increase in the company’s annual book-value growth topping 10 percent would make more sense, he said.

“This guy’s trying to make 30 million bucks a year,” he said. “That’s ridiculous for some 30-year-old kid who’s running a restaurant chain.”

Negative reaction to the pay arrangement has contributed to a swoon in Biglari Holdings shares. The stock now trades at around $283, down more than 47 percent from its peak of $418 in early April.

In a three-page letter to shareholders in May, Biglari defended the agreement, noting that it requires that he use at least half his after-tax bonus to buy additional Biglari Holdings shares, further tethering his fortunes to those of other investors.

“In other words, I am obligated to reinvest continually in BH. The premise coincides with my belief that stocks should be purchased with earned cash rather than be gifted,” he wrote.

Biglari Holdings said in Monday’s statement that the company’s governance committee, consisting entirely of outside directors, unanimously approved the incentive agreement because it in fact links pay to economic performance rather than stock-price or other non-performance-based benchmarks.

Biglari took over Indianapolis-based Steak n Shake Co. in a 2007 proxy fight, helped return its restaurants to profitability, then transformed it into a holding company for a diverse range of investments.

The renamed company, which relocated its headquarters from Indianapolis to San Antonio, has moved aggressively to invest or take over other firms, including a small Michigan insurer. The Steak n Shake restaurant operations remain in Indianapolis.


  • Wondering
    Well, to be frank, this is no different than what managers have done to their subordinates even before Biglari came into the picture. It's always been done in order to keep labor costs down. Ironic how it's caught up to managers and now they're feeling the pinch of low pay combined with extra work. I wonder if they now think a nickel to fifteen cent raise
    every six months or so makes for a productive employee...
  • Vote with your feet
    Biglari is taking a once quality establishment and milking it dry so that he can invest in other businesses and enhance his wealth. Vote with your feet and don't go to Steak 'N Shake. He will sell them eventually, at which point hopefully the new owners will run the business in an ethical manner.
  • Why should he get all the money???
    He did in fact put a cap on employees wages. He also will not let them hire anyone over minimum wage. Not to mention that the managers have not seen a pay increase in at least 2 year and were just told that they will pretty much never see a pay increase. If they want more money it will come in the form of bonuses which he is making harder and harder to achieve. On top of the fact that he is putting 40% of their bonus in escrow so even if you do achieve a bonus, you only see 60% of. He says that everything is performance based. After taxes and escrow, I don't feel a $20 dollar bonus for three months is adequate. Cost of living, gas, rent, food, etc goes up every year. How does he expect his people to survive???

    I don't really see what he is doing to perform when it is the associates and managers who work hard every day to deliver to the customers. They are the ones that put their blood, sweat and tears into the business that he so greedily wants to make money off of.
  • Me Too
    I have stopped going to Steak-N-Shake once I learned that they took away health benefits and replaced them with cheap-no value bogus health insurance. I also learned that they went in and told employees that Biglari put caps on wages far below their current pay and told them if they wanted a job, they had to accept the cut in pay or walk. And all this time, he is raking in 900,000 per year and wants to make it to 25 million a year.

    This is no company that deserves my patronage and none from other concerned citizens either.
  • I'm out also
    He is like the rest of the Indiana "ponzi" scheme artist who only think of themselves. Ultimately he will end up where they are at based in his actions.

    Love his picture with his people in the background wearing sas gear, except him with a suit. Arrogant with no guiding principles except MONEY!
  • I'm out
    It appears that Steak 'N Shake is doing so well now that they don't need my business any more. With this type of pay package and who it's going to, Steak 'N Shake appears to no longer be an Indiana company. I'm out.

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