As Wynn Resorts remains under a regulatory cloud and struggles to get back on track, another challenge has emerged: a bitter proxy contest from its largest shareholder and a "campaign for change."
Elaine Wynn, the ex-wife of Steve Wynn and now largest shareholder of Wynn Resorts, is behind a proxy battle that is set to come to a head at the company's upcoming annual meeting May 16.
She is seeking to remove legacy board member John J. Hagenbuch, whom she has referred to as a "close friend" of her ex-husband Steve Wynn, the company's former chairman and CEO who resigned earlier this year following sexual misconduct allegations. "No one with close personal ties to Mr. Wynn should serve on this committee," she said in a recent filing.
After exiting in February, Steve Wynn unloaded his 12 percent stake in the company in March for $2.1 billion. He has denied the sexual misconduct allegations, which were first reported in January by The Wall Street Journal.
Elaine Wynn's campaign is part of a broader plan, which she's titled "Restore Wynn," to force change on the company she co-founded and served as a director until April 2015. She believes the company long controlled by her ex-husband "needs and deserves a new board that is truly independent and wholeheartedly committed to the company's long-term success."
"Elaine's campaign goes way, way back — and the sexual harassment allegation probably gives her another platform to maybe get some of her previous grievances out," said Tuna Amobi, an analyst at CFRA Research.
Still, Elaine Wynn has insisted she's not seeking a seat on the board for herself or anyone that will represent her.
Also, she's asked that shareholders vote against approving the company's executive compensation plan — the so-called say on pay. Three independent proxy advisory firms — Institutional Shareholder Services, Egan-Jones Proxy Services and Glass Lewis & Co. — have come out in support of her position on rejecting the say-on-pay proposal and to withhold votes from Hagenbuch.
Hagenbuch, a six-year board member, is chairman of M&H Realty Partners and WestLand Capital Partners, investment firms he co-founded. He served on the three-member special committee of the Wynn Resorts board investigating the allegations against Steve Wynn.
Hagenbuch didn't respond to requests for comment for this story.
Wynn Resorts defends Hagenbuch, stating in recent documents in connection with the proxy contest that "Jay has the experience to effectively identify and manage Wynn's risk exposures and attendant vulnerabilities."
In a letter to shareholders Thursday, Wynn Resorts' board said Elaine Wynn's "campaign has been entirely disingenuous and is only serving to undercut the stability and progress we are making to transform Wynn Resorts." Also, it said, "her goal to 'Restore Wynn' reflects an insensitivity to the needs of the company at this important juncture."
Added Wynn Resorts' letter, "Both ISS and Glass Lewis have focused on the point that Elaine Wynn was a member of the board from 2002 to 2015, and that she herself bears some responsibility for some of the past vestiges for which she now criticizes the board."
Elaine Wynn, who holds a more than 9.2 percent stake in Wynn Resorts, sees the vote to oust Hagenbuch from the board as a referendum on the company's other legacy directors who oversaw the investigation into her ex-husband as well as the company's response to the allegations. She reportedly learned about an alleged sexual misconduct incident involving her ex-husband in 2009 and reportedly told the company's general counsel.
"Though the board acted swiftly when faced with a crisis, the legacy directors apparently failed to change the batteries of the smoke detectors well before the fire broke out," said ISS, the proxy advisory firm, in its recommendation and analysis released last week.
ISS also is critical of the legacy directors for their handling of the allegations and the length of time it took to get diversity on the Wynn Resorts board. In April, the company named three women as new independent board members and expanded its board.
"When the legacy directors decided to remove Elaine Wynn from the board in 2015 (thus eliminating all gender diversity from the board), it took them nearly twice as long to appoint a single woman director, Patricia Mulroy, as it took the board to appoint Betsy Atkins, Dee Dee Myers, and Wendy Webb last month," ISS said in its analysis.
CFRA's Amobi calls the addition of the three female directors "a significant step to kind of ease some of those concerns in terms of the overall [corporate] governance situation."
Shares of Wynn Resorts were down nearly 3 percent on Friday but the stock remains up 16 percent so far this year, easily outperforming the S&P 500 index.
Morningstar analyst Dan Wasiolek said the campaign by Elaine Wynn can be viewed as a distraction, and there are others, too.
"Obviously, the company has had to deal with a lot — dealing with gaming regulators, updating its board of directors and continuing to review that process," said Wasiolek. "But the company seems to be executing within that environment."
The proxy fight by Elaine Wynn comes as there's still uncertainty about Wynn Resorts' existing gaming licenses and its $2.5 billion casino resort project in Massachusetts. On Monday, the Massachusetts Gaming Commission agreed to take Steve Wynn's name off the gaming license for Wynn Resorts' planned casino in Boston, but it may not be enough to close the investigation.
Wynn Resorts' new CEO, Matt Maddox, last month sought to distance the company from Steve Wynn by telling the commission that management had taken several steps, including corporate culture and dropping the "Wynn" name from the planned Wynn Boston Harbor project, which is scheduled to open in June 2019.
"It seems it's not just about Steve Wynn, but it's also about what was or what wasn't presented to the gaming regulators at the time they were issuing the licenses," said Morningstar's Wasiolek.
The Massachusetts gaming regulator told CNBC on Wednesday its "investigation is active and ongoing." And Nevada's casino regulator said Thursday there remains "an active investigation" into the Las Vegas-based company.
"The company continues to fully cooperate with the Nevada and Massachusetts investigations," said Michael Weaver, a Wynn Resorts spokesman.
One risk is regulators could force more changes on the board and the leadership team who were on the gaming application.
Ultimately, some analysts believe Wynn Resorts will be forced to sell or break up the company.
Jefferies analyst David Katz said the company today lacks its "chief visionary and [its] chief diplomat" — Steve Wynn — and over time "won't be able to grow in the same ways and therefore capture the same multiple that it has historically. And therefore, they're going to conclude that the better option is to sell the company, either in whole or in parts, eventually."
The company's Macau business is seen as especially attractive, perhaps, but Wynn Macau's license is set to expire in 2022. There have also been reports the company's Boston Harbor property under construction may be sold. But CEO Maddox insisted in April in an appearance on CNBC's "Squawk Box" that "Boston is not up for sale."