The Compensation Curve | Casino Executive Compensation by the $Millions

"It's too expensive, I don't make that kind of money"! I believe that was my Father's response when I pointed out that a new Cadillac would be a much nicer car for our family than the aging Oldsmobile he was driving (I was twelve at the time). The response however, carries a truth, and rules our personal lives as well as dictating how the businesses that we join in our professional lives will be managed if they are to succeed.

Simple logic dictates that as businesses grow their annual gross revenues, they become more complex, and difficult to operate. Thus we would consider it self-evident that a Casino with revenues in excess of $100 million annually would compensate its key executives more richly than an operation taking in less than that amount.

Self-evident perhaps, but being the curious type and having just completed the 2003 HCE Gaming Property Compensation Report, I wondered if this is always the case? Furthermore, if it is, just how much more do senior executives in the larger casinos make than their peers in smaller operations? Using information obtained in our proprietary, previously mentioned survey of gaming properties, I decided to compare four of the top-paying executive position; GM/CEO, VP Casino Operations, VP Finance, and VP Sales & Marketing in casino operations making under $100 million, to the same positions at properties making in excess of $100 million, and see how logic holds up.

Starting at the Top
Where compensation packages (base salary and bonus) for GM/CEO's is concerned, logic is doing very well, thank you. At the median level, base salary for the top property executive was at $180,102 in casinos earning under $100M, while their peers at properties making greater than our benchmark was $300,000: 66.5% more (see Comparison Table). The savings of $119,898 goes a long way toward paying other expenses in a smaller property. At the 75th percentile the gap widens with casinos making over $100M paying CEO/GM salaries more than 2.5 times that of their smaller kin.

The difference was equally evident on the bonus line, where larger properties paid their GM/CEO's a median bonus of $79,315; almost double the $40,687 median bonus in smaller properties (see Comparison Table). As a percentage of base salary the large property executives made 26.4% at the median, compared to 22.6%. Bonus payments as a percentage of salary at the 25th percentile were also higher for large property execs; 18.8% compared to 15.6% in smaller casinos. However, at the 75th percentile, smaller property top executives earned bonuses equaling 30.4% of base salary compared to 21.8% in larger operations.

The Operation
The bigger casino operations are definitely following our thread of logic with base salaries for the VP Casino Operations. At the median level the Ops guys are making $160,647; 39.5% more than the $115,197 median for smaller operations. The difference is even greater at the 25th percentile, where large casino operations executives' out-earned exec's in smaller casinos by 58.5%, and at the 75th percentile, where the difference is 51.2%.

The bonus line follows a similar pattern. At the median, larger property Casino Operations VP's made $160,647 in bonus money; $45,450 more than the $115,197 paid in smaller operations. A difference of 39.5% (see Comparison Table). The difference in bonus earnings follows the salary curve at the 25th and 75th percentile, where the larger operations executives out-earn by 58.5% and 51.2%. Clearly the ability to manage the demands of larger, more complex operations has it's rewards.

High Finance
When we examine the two groups for the VP Finance position, it seems clear that large or small; casino properties take their finances seriously. The difference in base salary for what, in most properties, is the senior finance executive is $18,708 or 17.2%. An edge for the executives in larger properties, but not nearly as much as our first two positions. At the 25th percentile the difference remains nearly the same at 15.3%, but at the 75th percentile the larger property executives pull away a bit; out-earning their peers in smaller casinos by 35.0%.

It is a fact of compensation packages; bonus dollars are tied to salaries. The small property finance executives were paid a median bonus of $8,990 compared to $18,947 for their brethren at larger properties, just less than half as much. As a percentage of base salary, both group's median bonuses were somewhat meager in 2003; 14.9% for large property, and 8.3% in smaller ones. The lower than usual bonus percentage holds true at all percentiles with the exception of smaller property bonuses at the 75th percentile, which were 20.3%.

Selling and Marketing
In a rude affront to logic, the median base salary for a VP Sales & Marketing in properties with less than $100M in revenue is $146,316, or $6,321 more than the median salary for the same position in larger properties! At the 25th percentile, the difference favors small property executives even more (see Comparison Table), and we don't see logic reassert itself until we reach the 75th percentile where larger property marketing execs' out-earn by $29,124 or 18.1%.

The bonus tables once again, have to follow salary curves. However large property marketing execs' earned median bonuses of $25,913; 29.9% more than their smaller property peers, and 18.5% of base salary compared to 13.6%. That being said, bonuses at the 25th, and 75th percentile are a dead heat, and smaller property executives received larger payments by small margins. Only when we arrive at the maximum bonus payment for this position, do we find that the balance has swung back to the large property executives. Logic might seem to be down for the count. However an argument may be forwarded in logics' defense; this parity could also be an indication of the often-discussed shortage of qualified marketing executives in the gaming industry.

Logic Prevails
In the final analysis logic survives pretty well intact, having prevailed in the majority of comparisons. Furthermore we do not suggest that anyone should alter a career path designed to gain employment in larger casino operations. Casinos, and the gaming industry are flourishing in all shapes, and sizes in this country, and its growth seems far from over.

Stephen Goebel Vice President of HVS Executive Search, is responsible for managing the firm's gaming industry practice. Goebel runs an office in Las Vegas and serves the gaming industry's growing need for executive talent. More...

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Leora Lanz
HVS Sales & Marketing Services
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