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.


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