Read The Case: Corporate Governance And Executive Misconduct ✓ Solved

Read The Casecorporate Governance And Executive Misconduct At Wynn Re

Read The Case “Corporate Governance and Executive Misconduct at Wynn Resorts” at the end of Chapter 13 and respond to the following: Do you think Steve Wynn’s executive compensation was justified, and why or why not? Did the board of directors of Wynn Resorts operate according to the principles of good corporate governance, as described in this chapter? Why or why not? Do you think Wynn Resorts’ institutional and individual shareholders used the rights described in this chapter effectively to protect their interests? Why or why not? What do you recommend senior executives and the board of Wynn Resorts do now?

Sample Paper For Above instruction

Read The Casecorporate Governance And Executive Misconduct At Wynn Re

The case “Corporate Governance and Executive Misconduct at Wynn Resorts” presents a complex scenario involving executive compensation, board oversight, and shareholder rights amid allegations of misconduct. In analyzing whether Steve Wynn’s executive compensation was justified, it is essential to consider his contributions to the company's growth, the industry standards, and the ethical considerations involved. Historically, executive compensation in high-growth firms often reflects the value created for shareholders; however, excessive or unlinked compensation can lead to questions regarding its fairness and justification.

In the specific case of Steve Wynn, his compensation packages were notably substantial, often tied to company performance metrics and stock options. While on one hand, Wynn’s strategic vision and leadership significantly contributed to the company's rise in the Las Vegas hospitality industry, on the other hand, the scandal and misconduct allegations cast a shadow over his leadership. Given the circumstances, many argue that his compensation was not justified because it was awarded during a period of ethical breaches, which undermines the legitimacy of his earnings and the morality of rewarding misconduct.

Regarding the operation of Wynn Resorts’ board of directors, their adherence to principles of good corporate governance appears questionable based on the case details. Effective corporate governance mandates oversight, accountability, transparency, and ethical leadership. The board’s failure to detect or act swiftly upon allegations suggests a lapse in oversight and possibly a conflict of interest, especially if board members were close to Wynn or compromised by ties to the executive team. Such lapses weaken stakeholder trust and undermine the principles of integrity and accountability that form the foundation of sound governance.

In terms of shareholder rights, Wynn Resorts’ institutional and individual investors exercised limited influence to protect their interests during the misconduct revelations. Shareholders played a largely reactive role, as their ability to influence governance depended on the mechanisms for voting and activism, which appeared underutilized or ineffective in this scenario. The dispersed ownership structure often hampers coordinated efforts to challenge executive decisions or demand greater transparency. Nonetheless, increased shareholder activism and engagement could have served as a corrective force to prompt better oversight.

Moving forward, I recommend that Wynn Resorts' senior executives and board members undertake several strategic actions. Firstly, implementing more rigorous governance practices, including independent oversight and stronger ethical standards, is crucial to rebuild credibility. Secondly, the board should conduct comprehensive reviews of executive compensation policies to ensure fairness, transparency, and alignment with long-term stakeholder interests. Thirdly, shareholders should be encouraged to participate actively, exercising their rights through voting, engagement, and advocacy to influence corporate policies. Finally, the company should prioritize cultivating an ethical corporate culture through training and transparent reporting mechanisms to prevent future misconduct.

Overall, the case underscores the importance of aligning executive incentives with ethical standards and stakeholder interests, reinforcing the necessity for robust governance structures, and empowering shareholders to ensure responsible corporate leadership.

References

• Adams, R. B., & Ferreira, D. (2007). A theory of friendly boards. The Journal of Finance, 62(1), 217-250.
• Beasley, M. S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. The Accounting Review, 71(4), 443-465.
• Larcker, D. F., & Tayan, B. (2011). Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences. Stanford Business Books.
• Mallin, C. A. (2019). Corporate Governance. Oxford University Press.
• Solomon, J. (2017). Corporate Governance and Accountability. Wiley.
• Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737-783.
• Huse, M. (2010). Boards, Governance and Value Creation: The Human Side of Corporate Governance. Cambridge University Press.
• Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301-325.
• Gillan, S. L., & Starks, L. T. (2000). Corporate governance proposals and shareholder activism: The role of institutional investors. Journal of Financial Economics, 57(2), 275-305.
• Tricker, R. B. (2015). Corporate Governance: Principles, Policies, and Practices. Oxford University Press.