Tuesday, June 27, 2000 | 10:58 a.m.
Bobby Baldwin received a $7 million signing bonus as incentive to stay on with Mirage Resorts Inc. after its merger with MGM Grand Inc.
The new Mirage chief executive's bonus was revealed in MGM Grand's annual proxy statement, together with the pay increases of other key MGM Grand executives. Though not an increase from his pay as chief financial officer of Mirage Resorts, Baldwin's $1 million in pay makes him MGM Grand's highest-paid executive, together with MGM Grand Chairman Terry Lanni.
The $7 million is nearly identical to the amount of money Baldwin would have received as a "golden parachute" payment, had he decided to leave Mirage Resorts. Baldwin's change of control agreement entitled him to three times his highest annual salary plus bonus.
"If the choice is between paying him that much to leave and that much to stay, they might as well pay him that much to stay," said Robin Farley, gaming analyst with PaineWebber. "The Mirage properties have always been viewed as some of the highest quality assets in the industry. Bobby was involved in day-to-day operations, and knows what makes them tick."
Baldwin also received 800,000 options to buy stock as part of his employment agreement with MGM Grand. The options, which will vest from 2001 to 2004, have an exercise price of $32.50 -- about 75 cents below MGM Grand's current price.
Baldwin received $1 million in pay and $1.35 million in bonuses last year at Mirage Resorts. At the time of Mirage's merger with MGM Grand, Baldwin held 4.08 million stock options; however, Mirage's proxy did not indicate what the exercise price was on these options. MGM Grand paid $6.4 billion, or $21 per share, for Mirage.
But Baldwin was not the only executive to receive incentives to stay on with MGM Grand. On June 1, four top MGM Grand officials received new four-year contracts and long-term options.
Topping the list was Lanni, who will receive at least $1 million per year for the next four years. Lanni stepped down as chief executive of MGM Grand in October 1999, but was enticed to return as full-time chairman in April by MGM Grand controlling shareholder Kirk Kerkorian.
Lanni also received a $40,000 signing bonus and 1 million options -- 600,000 exercisable at $32.50 per share, and 400,000 at an undisclosed exercise price.
Lanni received $1.94 million in salary and bonuses in 1999, up from $1.5 million in 1998. He also exercised 962,000 options in 1999, the proxy indicates, receiving $11.2 million.
The increase in Lanni's pay came in bonuses -- $940,248 in 1999, up from $500,000 in 1998. All top MGM Grand officials saw increased bonuses in 1999; the proxy said the increases were a reward for the successful completion of the merger with Primadonna Resorts and the successful opening of MGM Grand Detroit.
The bonuses may be on the way up in coming years, as MGM Grand raised its maximum annual bonus from $1 million to 150 percent of an executive's salary -- a cap of $1.5 million in the case of Lanni and Baldwin. MGM Grand's proxy said this change is necessary "in order to remain competitive for the most qualified executives."
Dan Wade, one of MGM Grand's co-chief executives, signed a four-year contract worth $800,000 per year -- a 50 percent raise over his 1999 salary. Wade, who was promoted from chief operating officer to co-CEO in December 1999, also received 150,000 options exercisable at $32.50 per share as part of his new contract.
In 1999, Wade earned $1.15 million in salary and bonuses -- a 43 percent pay increase -- plus 843,000 options exercisable at $23.88 per share. Assuming MGM Grand's stock appreciates at 10 percent annually over the next 10 years, these options would be worth $32 million. Wade also exercised 143,000 options in 1999, netting $1.64 million.
Also receiving a pay hike was co-CEO John Redmond, promoted from the top post at Primadonna Resorts in December 1999. Redmond will also receive $800,000 in annual salary for the next four years, doubling his 1999 salary. He also received 150,000 options at $32.50.
In 1999, Redmond was paid $1.29 million in salary and bonuses -- double his 1998 pay -- and granted 1.02 million options, exercisable at $18.88 and $23.88 per share. Assuming 10 percent annual appreciation through 2009, these options would be worth $37.8 million. Redmond exercised 16,000 options in 1999, netting $185,000.
The third top official to receive a pay increase was President and Chief Financial Officer Jim Murren, named to the president's position in December. Murren's 4-year, $800,000 per year contract came with 150,000 options exercisable at $32.50.
In 1999, Murren received $777,000 in salary and bonuses, a 19 percent increase over 1999. He received 250,000 options exercisable at $23.88, giving them a potential 10-year value of $9.5 million.
While 1999 meant a big payday for MGM Grand's top officials, Farley believes shareholders don't mind, given the stock's performance in 1999. MGM Grand's 85 percent rise in 1999 outpaced a casino stock index's 51 percent increase, and the 20 percent rise of the S&P 500.
"I don't think shareholders mind seeing executives paid well for those kind of returns," Farley said.
The proxy statement also said six new officials -- five from Mirage Resorts -- have been nominated to MGM Grand's board. Chief among them is Baldwin, who did not serve on Mirage's board.
Also nominated from Mirage's former board is George Mason, senior managing director at Bear Stearns; Ron Popeil, president of television marketing company RONCO Inc.; Daniel Wayson, developer and former head of Mirage's New Jersey operations; and Melvin Wolzinger, a Las Vegas developer and restaurant and casino operator.
The sixth nominee is Gary Jacobs, a former Los Angeles attorney hired as MGM Grand's general counsel on June 1.
Since Kerkorian has committed to voting for the nominees, their election to the board is assured, the proxy said. Once elected, the nominees will increase MGM Grand's board to 20 members.
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