Steak 'n Shake's owner removes its CEO's pay limits

Sardar Biglari, who controls more than 50% of the company’s shares, will no longer have his salary capped at $10 million, says RB’s The Bottom Line.
Photograph courtesy of Steak 'n Shake


Last month, Steak ‘n Shake owner Biglari Holdings quietly removed limits on the amount it can pay its chairman and CEO, Sardar Biglari.

Biglari’s pay package will no longer be capped at $10 million, beginning this year. And he will no longer be bound by restrictions that he use 30% of that pay on company stock, according to a recent Securities and Exchange Commission filing.

Biglari receives a salary of $900,000 as CEO of the company, and a bonus based on the annual increase in Biglari Holdings’ intrinsic value. Last year, he received no such bonus, limiting his pay to that $900,000.

Removing the limit could put Biglari in line for some substantial pay packages, especially if the company makes any acquisitions.

The change comes a year after moves that have effectively given Biglari full control of Biglari Holdings, through the creation of two classes of shares last year as well as stock purchases that gave him controlling voting rights.

Biglari Holdings is an investment vehicle used to buy companies in disparate industries, though its two biggest holdings are Steak ‘n Shake and 15% of Cracker Barrel stock—the latter of which is controlled by Biglari’s hedge funds, The Lion Fund and Biglari Capital Corp. Those hedge funds’ other primary holding is stock in Biglari Holdings.

Unlike other companies that buy back stock and then retire it, Biglari Holdings has acquired its own stock through the hedge funds and then does not retire the stock. Biglari votes the shares like any other shareholder. Those funds control more than half of Biglari Holdings’ shares, giving its chairman voting control over the company.

In addition to his salary as CEO of Biglari Holdings, Sardar Biglari receives incentive payments for his hedge funds’ performance that were not subject to the now-defunct $10 million cap. He did not receive an incentive payment in each of the past two years, though he did receive $31.6 million two years ago.

Indeed, the incentive structure of Biglari’s pay as both CEO of Biglari Holdings and through those hedge funds mean he can see wild variations in what he receives from one year to the next.

Biglari’s total pay package this year—including the hedge fund incentive—is likely to be among the lowest in the industry. That’s due to weak performance at Steak ‘n Shake and generally weak performance by Cracker Barrel stock.

But his total pay package two years ago, if you include the investment incentives, made Biglari more well-paid than even the CEOs of Chipotle Mexican Grill and McDonald’s Corp.

Biglari’s pay package has been a matter of some controversy. When it was first proposed in 2010, shareholders balked, and the pay package was capped at $10 million. At the time, Biglari did not own controlling shares in Biglari Holdings.  

Three years later, the company transferred Cracker Barrel and some Biglari Holdings and other stock to the hedge funds—essentially separating the operating businesses such as Steak ‘n Shake (as well as Maxim magazine and some insurance companies) from the stock investments. He was then given the separate incentive fee, not subject to the cap.

So, to summarize: Biglari Holdings removed a $10 million cap on its CEO’s pay that would ultimately have proven ineffective and been moot for the past couple of years.

But it could be a different story next year.

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