Investors who filed suit against the officers and directors of Wynn Resorts Ltd. claiming they failed to protect the company and employees from former CEO Steve Wynn’s alleged abusive behavior have reached a settlement agreement, New York State Comptroller Thomas P. DiNapoli announced today.
“We filed our lawsuit in response to serious and repeated allegations of sexual misconduct by Steve Wynn and the prior board’s alleged failure to stop it,” DiNapoli said. “We are gratified that the reforms in this agreement and those undertaken following the initiation of our lawsuit will protect Wynn Resorts’ employees and shareholders against future harm.”
“This agreement institutes a number of landmark reforms to improve governance and accountability at Wynn Resorts,” said New York City Comptroller Scott M. Stringer. “Steve Wynn is alleged to have created an unacceptable culture of sexual misconduct and harassment and the prior board’s alleged passivity perpetuated it. There must be zero tolerance for this kind of behavior, and this agreement is a major step forward in protecting employees and shareholders from future harm.”
Comptroller DiNapoli and the New York City Retirement Systems and Pension Funds, as co-lead plaintiffs, through their counsel at Cohen Milstein Sellers & Toll PLLC, filed a derivative lawsuit, a legal action taken on behalf of a company when it is believed its officers or directors failed to comply with their fiduciary obligations to the company. The lawsuit claimed the Wynn Resorts’ prior board and certain officers knew about Mr. Wynn’s alleged sexual abuse and harassment of employees but made no effort to stop it. The lawsuit sought monetary damages and improved governance measures aimed at protecting the corporation, its employees and shareholders from future harm.
Pending court approval, the settlement requires Mr. Wynn to personally pay $20 million to the company. Another $21 million will be paid to the company by insurance carriers on behalf of former and certain current Wynn Resorts’ employees, officers and directors. As part of the settlement, liability has not been admitted.
The corporate governance reforms Wynn Resorts Ltd. will adopt include:
- Independent Board Chair: Amend the bylaws to separate the role of board chair and CEO, with the additional requirement that the board chair be independent.
- Majority Vote Requirement: Amend the bylaws to require all directors seeking election to the board receive majority vote support except in the instance of a proxy contest.
- Commitment to Diversity: The board will publicly announce its intention to achieve 50 percent diversity on its board of directors and choose from a diverse pool of board candidates.
- Succession Plan: The board will provide an enhanced succession plan for executive officers and board directors.
- 10b5-1 Plan: The board will require directors who want to sell Wynn Resorts stock to do so through a 10b5-1 plan. The 10b5-1 plan requirement would also apply to any executive with more than $15 million in company stock.
The value of the reforms attributed to the lawsuit is estimated at $49 million, bringing the total settlement value to $90 million.
Additionally, in part because of the derivative litigation, Wynn Resorts enacted a number of policy changes that significantly strengthen employees’ rights to a workplace free from mistreatment or abuse, including among others, a substantial revision and update to the company’s:
- Corporate Prevention of Harassment Policy;
- Personal Relationships and Potential Conflicts of Interest Policy;
- Spa and Salon Policy; and
- Code of Personal Conduct.
Other significant improvements include:
- Improvements to the company’s sexual harassment and diversity training for all employees;
- Enhancement of the ability of Wynn employees to report complaints, including the establishment of a third-party hotline; and
- The prohibition of employer-forced arbitration clauses and non-disclosures agreements.
As of Oct. 31, 2019, New York State Common Retirement Fund held shares in Wynn Resorts with an estimated value of $22.6 million. The New York City Pension Funds held shares in Wynn Resorts with an estimated value of $22.3 million.
About the New York State Common Retirement Fund
The New York State Common Retirement Fund is the third largest public pension fund in the United States with an audited value of $210.5 billion as of March 31, 2019. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. The Fund has consistently been ranked as one of the best managed and best funded plans in the nation. The Fund's fiscal year ends March 31.
About the New York City Comptroller
As Comptroller of the City of New York, Scott M. Stringer is the investment advisor to, and custodian and a trustee of, the New York City Pension Funds (the “NYC Funds”) responsible for protecting the retirement security of over 700,000 New Yorkers. The NYC Funds are the fourth largest pension fund system in the country with over $200 billion in assets under management. Learn more here.