Sardar Biglari, who has spent much of his public company career finding new methods of paying himself bonuses, is apparently taking issue with bonuses paid to the executives of Cracker Barrel.
The CEO of Biglari Holdings, which owns Steak n Shake, has been an irritant to the family dining chain for about a decade now, having tried and failed so many times to get on the company’s board that we’ve lost count.
He remains one of its largest shareholders, though that has dwindled to 8.7% from a peak of nearly 20%.
On Friday, he wrote another letter to the company’s shareholders protesting its performance. He said the company’s stock hasn’t kept pace with its peers but protested the board of directors’ “steadfast support of the executive team.”
That support is in the form of bonuses. “Last year, despite the company’s precipitous decline in business due to the COVID-19 pandemic, the board not only approved unearned performance bonuses to executives but also removed the performance criteria by which executive equity grants for the year are assessed,” Biglari wrote. “In the context of an unprecedented COVID environment, we question the board’s judgment in granting performance bonuses and removing performance criteria for management, at the expense of shareholders.”
We don’t have issues with Biglari’s comments so much as we do with the fact that he has this tendency to toss stones around his own glass house. Biglari’s own track record on compensation is questionable at best.
We won’t go into all the details of the company’s compensationhistory, but it’s extensive. He gets potential bonuses as both CEO of Biglari Holdings and as part of an incentive fee paid to his Biglari Capital, which is the one that owns the Cracker Barrel stock.
He has been paid relatively little incentive payments in recent years, largely because Cracker Barrel stock has stagnated and Steak n Shake has struggled. But starting in 2017, Biglari Holdings entered into a “service agreement” with Biglari Enterprises and Biglari Capital paying him $700,000 per month, or about $8.4 million.
In reality, therefore, Biglari got about $10.3 million in total compensation for those various activities, or just about $500,000 less than the amount paid to … McDonald’s CEO Chris Kempczinski. He was paid more than Darden CEO Gene Lee, Wendy’s CEO Todd Penegor and Papa John’s CEO Rob Lynch.
In any event, Biglari now wants Cracker Barrel to pay out more dividends, something he has regularly asked over the years. As a large shareholder of the company, Biglari gets a lot of money from Cracker Barrel dividends. His company has received well over $200 million from Cracker Barrel in the form of dividends.
Biglari apparently wants more. “The board should consider a more aggressive dividend payout policy,” he wrote. “Ideally, the company would target a near 100% dividend payout ratio.” He wants a regular dividend and a special dividend adjusted based on earnings.
Biglari noted that the company paid dividends “at levels approaching its earnings” between 2015 and 2017. “We were an influential force behind such payouts in the past,” he said.
Biglari has tried five times to win seats on the board or convince shareholders to do something he wants. He has lost all five times. That includes last year, when one of his hand-picked nominees was kept off the board.
Only 2% of non-Biglari votes went for his candidate.
We can only guess, however, that Biglari is gunning again for board representation of some sort. “We firmly believe, however, that as a direct result of the limited relevant industry experience on the board, management will likely continue on with a strategy that has failed to create shareholder value,” he said.