This excerpt taken from the LNY DEF 14A filed Apr 28, 2006.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In August 1993, the Board of Directors established a Compensation Committee to review and approve the compensation levels of members of management, evaluate the performance of management, consider management succession and consider any related matters for the Company. The Committee is charged with reviewing with the Board of Directors in detail all aspects of compensation for the Companys executive officers.
The philosophy of the Companys compensation program is to employ, retain and reward executives capable of leading the Company in achieving the Companys business objectives. These objectives include creating and preserving strong financial performance, increasing the Companys assets, positioning the Companys assets and business operations in geographic markets and industry segments offering long-term growth opportunities, enhancing stockholder value, and ensuring the Companys survival. The Committee measures the accomplishment of these objectives against conditions prevalent in the industry within which the Company operates. In recent years, these conditions reflect a highly competitive market environment.
The available forms of executive compensation include base salary, cash bonus awards, stock grants and stock options. Each component is intended to serve the Compensation Committees philosophy; however, performance of the Company is a key consideration. The Companys compensation policy recognizes, however, that stock price performance is only one measure of performance and, given industry business conditions and the Companys long term strategic direction and goals, it may not necessarily be the best current measure of executive performance. Therefore, the Companys compensation policy also gives consideration to the achievement of specified business objectives when determining executive officer compensation. An additional objective of the Compensation Committee has been to reward executive officers with equity compensation in addition to salary in keeping with its overall compensation philosophy, which attempts to place equity in the hands of its key employees in an effort to further instill stockholder considerations and values in the actions of all the key employees and executive officers. In 2005, the Committee also reviewed the base salary and bonus recommendation made by the CEO based upon his assessment of the performance of individual executive officers and his assessment of each of the Companys executive officers past performance and expectations as to future contributions.
In furtherance of the Companys compensation philosophy and goal of employing, retaining and rewarding its executives who have demonstrated a desire and ability to lead the Company in the pursuit of its business objectives, in 2003 the Company entered into a Personal Service and Employment Agreement with the CEO. Prior to entering into the employment agreement, the Committee hired a compensation consultant to advise it concerning the appropriate compensation and perquisites, including long term compensation that should be paid to the CEO. The employment agreement, which is discussed in more detail below, became effective as of January 1, 2003 and terminates on December 31, 2007. The employment agreement establishes the framework for the initial base salary payable to the CEO and further provides for additional bonus awards under any bonus programs established by the Company and/or, based upon merit and the Companys performance and provides a range of bonus awards from the Compensation Committee. The employment agreement also provides for certain additional executive benefits and perquisites to be provided to the CEO.
The employment agreement established the initial salary payable in 2003 for the CEO and a minimum base salary for 2005. In establishing the salary payable to the CEO for 2005, the Compensation Committee considered a number of factors. The general considerations included a review and evaluation of the compensation and salary levels for similar level executives for other comparable companies, the achievement of specified business objectives during the prior fiscal year including progress made by the Company in improving revenues, income and operating cash flows, and progress made by the Company in development and improvements in customer
satisfaction. The stock grant and stock options were awarded to the CEO in accordance with the terms of his employment agreement. In determining the cash bonus awarded to the CEO, the Compensation Committee took into account the performance of the Companys common stock, its increased revenues and earnings, the repositioning of the Company into gaming, the purchase of the Golden Nugget Hotels and Casinos and the exceptional performance required to develop significant projects in Texas and around the country.
Section 162(m) of the Internal Revenue Code generally denies a deduction to any publicly held corporation for compensation paid in a taxable year to the Companys CEO and four other highest compensated officers to the extent that the officers compensation (other than qualified performance-based compensation) exceeds $1 million. The Compensation Committee does not intend to be limited in awarding executive compensation that meets the Section 162(m) deductibility requirements and has not structured the CEOs bonus to satisfy Section 162(m). The Compensation Committee will exercise its discretion to award non-deductible compensation when it considers it in the best interests of the Company and stockholders to do so.
Joe Max Taylor, Chairman
Michael S. Chadwick