On Monday afternoon, the Wall Street Journal broke the news that Steve Wynn, the chairman and chief executive of Wynn Resorts, had hidden a $7.5 million payment to “a woman who accused the casino mogul of forcing her to have sex.” It was the latest in a 10-day string of revelations about Wynn’s sexual behavior, going back decades, that has left him bruised in the press yet still in control of his empire.
About an hour and a half later, Lululemon Athletica announced that Chief Executive Laurent Potdevin had resigned “effective immediately.” He’d steered the company back on track after a scandal involving its founder, but it didn’t matter. Potdevin had fallen short of the company’s “standards of conduct,” the release said. His transgression was not spelled out, but it was easy enough to surmise in this #MeToo moment.
For all the high-powered men who have been brought down for everything from sexual misconduct to harassing or abusing women, Wynn and Potdevin are the first two chief executives of publicly traded companies to face accusations under the #MeToo umbrella since the Harvey Weinstein expose last October. So why have the responses of the two companies’ boards been so different? Why was Lululemon so quick to toss Potdevin overboard? And why was Wynn Resorts more reluctant? Wynn finally stepped down late Tuesday.
One obvious reason is that Steve Wynn wasn’t just the chairman and chief executive of Wynn Resorts, he was its founder, and one of the men who built modern Las Vegas. Potdevin, by contrast, had only been at Lululemon since 2014, and did not come from an athletic wear background.
But I would suggest a more important reason: the makeup of the two companies’ boards. To compare the two of them is to see the importance of crafting a board that cares about corporate governance.
Let’s first examine the board at Wynn Resorts. The founder’s dual role of chairman and CEO makes it hard for the board to properly perform its oversight role. Wynn is also its largest shareholder, with nearly 12 percent of the stock. Combined with the 9.35 percent his ex-wife owns -- which he currently controls, though she is trying to change that -- that means that 21 percent of the stock is under his control. That’s a lot of control.
New blood on the board has not been a Wynn Resorts priority. The average age of the directors is 70 years old. The youngest member is Ted Virtue, the 57-year-old founder of MidOcean Partners, a private equity firm; the oldest is 83-year-old Ray Irani, the former CEO of Occidental Petroleum. Half the directors have been on the board for a decade-plus, and two more have been on for over five years.
At least some of the Wynn Resorts directors look more like longtime friends or associates than directors with real independence from Wynn. Daniel Boone Wayson used to run the Golden Nugget Casino in the 1980s. For years, Wynn controlled the Golden Nugget in Las Vegas, and built a Golden Nugget in Atlantic City. Wynn has long been close to Nevada politicians, which helps explain the presence of Robert Miller, the former governor of Nevada who has been on the board for 15 years. And Patricia Mulroy, the only woman on the Wynn board, once served on the Southern Nevada Water Authority board -- not to mention the Nevada Gaming Commission, which of course is a crucial agency for Wynn.
Now let’s take a look at the Lululemon board.
First, Potdevin was never the chairman. Second, the average age of the company’s nine-person board is 52. It includes four women. A large outside shareholder, Advent International, holds two seats. And many of the directors have experience with companies with well-known brands, including The Gap, Starbucks, Tesla, and Sirius Equity LLP, a firm that invests in retail brands.
The Lululemon board has skin in the game. The four women on the Lululemon board, all of whom are younger than Wynn’s Patricia Mulroy, are less likely to tolerate sexual misconduct than the elderly men who served as Wynn Resorts’ directors. And, as my Bloomberg Gadfly colleague Sarah Halzack has noted, Lululemon understood that Potdevin was replaceable. For now, three of Potdevin’s top lieutenants will report to Chairman Glenn Murphy, who once ran The Gap Inc., until a new CEO is found.
The Wynn Resorts board, by contrast, seemed terrified of losing its founder and guiding light even as regulators zeroed in on the allegations on two continents.
Casino authorities in Macau, Nevada and Massachusetts have all opened investigations in the allegations against Wynn. Of these, the most worrisome is in Massachusetts, where the company is building a $2.4 billion hotel and casino complex. Massachusetts casino regulators “have been sticklers on ethical issues,” one casino expert told the Boston Globe. “And they will be under a national microscope in the Wynn case.”
With so much at stake, Wynn wasn’t able to hold on forever. But by dragging things out, the Wynn Resorts board created more problems for the company, not less. That’s not exactly the mission of corporate boards.
The directors should take a look at Lululemon to see how it’s done.
Joe Nocera
Joe Nocera is a Bloomberg View columnist. -- Ed.
(Bloomberg)
