Biglari gets huge pay raise at SNS

[wabuffo]

http://idea.sec.gov/Archives/edgar/data/93859/000009385909000036/form8k624.htm

On June 19, 2009, the Compensation Committee of the Board of Directors voted unanimously to increase the salary of the Chairman, President and Chief Executive Officer, Sardar Biglari, to $900,000 per year effective immediately.  Mr. Biglari’s previous salary had been $280,000.

This is not very Buffett-like behavior is it?  

wabuffo

[Parsad]

I sent him an email:

Hey Sardar,
 
Congratulations on the raise, and I'm sure you deserve it, but be prepared for some pointed questions by shareholders for the compensation committee.  And no, Buffett's salary with inflation doesn't come to $900K per year.  
 
All the best,


Sanjeev Parsad

Corner Market Capital Corporation
Suite 1620, Box 36
1140 West Pender Street
Vancouver, BC  V6E4G1

Then again, if the company is earning $5-6M per quarter again by the AGM, I don't think too many people are going to care.  Most will realize how much work this turnaround really took and the amazingly short span of time he did it in.  Cheers!

[Parsad]

Wabuffo, I didn't even read the filing and went simply by your quote, but the other half of that filing was this:

On June 24, 2009, the Company closed on a transaction repaying in full all sums due and owing under, and terminating, the Amended and Restated Note Purchase and Private Shelf Agreement between the Company and The Prudential Insurance Company of America originally dated as of September 20, 2002, as amended.  The Company’s payment included $12.1 million in principal and interest and $0.5 million of yield maintenance premium.

So either they've sold some properties or used some of the cash hoard, but SNS has no long-term debt any longer other than lease obligations.  They still have the remaining $17M on their line of credit.  Cheers!

[link01]

hmmm. not sure yet what to make of this. wonder will he be getting a similar pay raise at west?

on the one hand he holds 3 top executive positions: chairman, pres, & ceo. on the other hand, no matter how hard he works (and i'm sure its harder than most) he still must divide his time between west, sns, & the lion fund. at what point does he lose effectiveness? in his defense, i think what he's achieved in just a short time has been remarkable.

and, of particular interest to me lately: will his pay raise incentivise him to finally write a shareholders letter so that all shareholders get the benefit of his thoughts, plans, & commentary, & not just those who can attend the annual meetings?

[OracleofCarolina]

Congrats to Sardar! I hope he folds the Lion Fund and WEST
into SNS.

[ragu]

[...]wonder will he be getting a similar pay raise at west?

link,

Seeing as he has gotten no salary/bonus at Western from 2006 through 2008 for his duties as President and Chief Executive, I'd say he's probably due a pay raise.   

Best,
Ragu

[frog03]

Ridiculous increase in salarly, especially in light of his other duties and the size of the company.   Would Warren get himself a raise of this nature?  Biglari is no Warren...

[prevalou]

he is no Prem who earns a 600 000$ salary within a  bigger company.
Why not distribute a dividend like Prem did.

[link01]

[...]wonder will he be getting a similar pay raise at west?

Seeing as he has gotten no salary/bonus at Western from 2006 through 2008 for his duties as President and Chief Executive, I'd say he's probably due a pay raise.   

[...]wonder will he be getting a similar pay raise at west?

Seeing as he has gotten no salary/bonus at Western from 2006 through 2008 for his duties as President and Chief Executive, I'd say he's probably due a pay raise. 

very true, ragu,  tho i was talking with a bit of tongue in cheek. ofcourse, a similar salary at west would be out of the question given its small size & the fact that $900k per yr there would consume 40% of its owners earnings.

and yes he deserves a pay raise. so does web & prem, among probably just a very few others. i didnt see one of this magnitude coming tho. like them, i really thought sardar was content to pay himself by building the long term shareholder value of the co's he is both captain of & the largest shareholder in...and by believing he would.

that said, i still think sardar ticks more boxes in the 'buffett-like' categories than anyone else i know of except perhaps prem watsa.

i'm anxiously waiting for his shareholder letters for both sns & west. am i the only one antsy on that score?

[Partner24]

No, Biglari is not Warren, nor Prem Watsa nor Steven Markel.

Biglari is Biglari. It's important for people to make a clear difference in all of them. It's not because you write intelligent and well written letters like Warren that you necessarely have his talent, his fiduciary aptitude and his ethic. Everybody is unique and when you think otherwise there is someone who is overrated and the other one is underrated for each trait of their respective personality and aptitude.

That being said, even if everyone is unique, you can compare them if you want to. You can look at the track record of all of them, their respective compensation and make your own conclusion about all of them.

Cheers!

[ragnarisapirate]

obviously, Biglari is Biglari, and not Buffett... he has essentially taken over 3 companies (and been on the verge of being hostile, too)-very unBuffettesque. It isn't as if his Lion Fund letters have not screamed this in the past.

Granted, I have not been in on their conversations or anything. Maybe he is a lot different in those situations.

Does anyone think that his massive raise is a subliminal way of saying 'hey guys... there is a bunch of good news getting ready to come out!'? or am I reading too much into this?

My thinking is in line with what Sanjeev said in his email to Sardar; I can't imagine that he would have taken such a raise without a damned good reason for it (as if keeping the company from being insolvent isn't good enough).

[prevalou]

Does he pass the buffett test on retained earnings and market value at Western Sizzlin ? Has his fund a good track record?

[JohnReuwer]

Pay is a very personal choice and I don't think we can expect Buffetteers to necessarily follow our hero in that regard.  While Buffett, and to some extent Watsa, have extremely low salaries, there are plenty of other excellent executives/money managers that pay themselves handsomely for their work.  Now with regards to SNS specifically, do you think SNS will attract someone of Sardar's caliber for less than $900K/year?  Is it really reasonable to expect someone like Sardar to work for so cheap?

It's simply not fair to judge others against Warren.  Warren was forged in a different era than Sardar just as Graham was forged in a different era than Warren.   

[maxprogram]

As an owner of Steak n' Shake, obviously I would rather pay Sardar Biglari less for doing the same job. In fact, if I could pay the management teams of all my current holdings less (and still be assured their performance is up to par), I most certainly would.

As an owner of Berkshire Hathaway, I couldn't be happier to pay Warren Buffett only $100,000 a year for his services to the company. But if for some strange reason the board decided to raise his salary to $30 million a year, I wouldn't mind it a bit, and I don't think too many other Berkshire shareholders would mind. Everyone knows Buffett is worth way more than that to Berkshire.

Biglari hasn't had the time to completely prove himself yet. But what he's done so far has shown the potential to create a huge amount of value for these companies, and not at the expense of shareholders, employees or other stakeholders.

We don't yet know the reason for the raise. There could be many reasons, some less "honorable" than others. As an owner, I would like to see some sort of explanation for the pay raise, even if it's just "better performance." (See Chapter 35 in Robert Cialdini's new book.)

Also, to put the new pay into perspective, below is the 2008 CEO/Chairman compensation for restaurants of similar size. (If the Chairman role is split, I combine the two salaries. Includes option & stock grants.)

$9,207,748 -- Ruby Tuesday
$6,137,152 -- Landry's Restaurants
$4,610,310 -- California Pizza Kitchen
$3,188,864 -- Red Robin Gourmet Burgers
$2,605,941 -- Denny's Corp.
$2,172,416 -- BJ's Restaurants (includes both co-founding VPs)
$1,386,016 -- Ruth's Hospitality Group (includes old CEO fired in 2008)
$400,000 -- Luby's Inc.
$383,071 -- Frisch's Restaurants

[Smazz]

I dont own SNS but it wouldnt sit well with me.
The optics alone are not good but.. I suppose if he would have tied his salary to targets as bonus - def could be justiifed. Thats just a big sum for a small company.