A storm is brewing within Playtech, one of the world’s leading gambling software providers, as shareholders react strongly to a proposed €100 million bonus scheme for senior executives. The scheme, primarily benefiting CEO Mor Weizer, comes in the wake of Playtech’s recent €2.3 billion sale of its Italian sports betting arm, Snaitech, to Flutter, the owner of Paddy Power.

Playtech announced the sale as a strategic move, aiming to focus on its core business, but the bonus pool linked to the deal has drawn heavy criticism. The proposal outlines substantial bonuses for senior management, with Weizer positioned as the biggest beneficiary, though the exact figure has not been disclosed. Furthermore, Playtech’s management is set to receive up to 10 percent of profits from any future asset disposals, an arrangement that has intensified shareholder concerns.

Shareholder backlash

Some investors were quick to voice their displeasure. Jeremy Raper, a prominent Playtech shareholder, went as far as publishing an open letter to the company’s remuneration committee, describing the bonus scheme as “the most egregious case of shareholder value expropriation in the history of UK public markets.” Raper argues that the absence of performance targets tied to the bonus pool allows executives to be rewarded without accountability, raising concerns about corporate governance. His frustration is shared by Peter Smith of Palm Harbour Capital, who criticised the bonus as excessive and unwarranted, given that Playtech already has a robust remuneration structure that includes shareholder returns.

Other investors questioned the logic of such a large payout when Playtech’s stock, although up 80 percent in the past 12 months, has underperformed in recent years. They argue that such a scheme might incentivise executives to push for quick sales of assets, even at the expense of long-term company value, in order to secure their personal gains.

CEO compensation under fire, a growing trend in gaming

Over the past five years, shareholders in various public gaming companies have increasingly voiced concerns over excessive CEO compensation, particularly when such pay appears disconnected from company performance or ethical standards. In 2018, Wynn Resorts faced backlash after Steve Wynn resigned amid sexual misconduct allegations, with investors criticising the hefty severance package he received. Two years later, Crown Resorts found itself in a similar situation as shareholders expressed dissatisfaction with Ken Barton’s high pay while the company faced regulatory scrutiny and financial struggles.

In April 2021, Las Vegas Sands shareholders raised concerns over Sheldon Adelson’s substantial compensation during the COVID-19 pandemic, which had significantly impacted revenues. The trend continued into 2022 when Entain’s shareholders criticised CEO Jette Nygaard-Andersen’s executive bonuses, highlighting a disconnect between compensation and shareholder returns.

Most recently, in May 2023, Flutter Entertainment faced similar scrutiny as shareholders questioned CEO Peter Jackson’s bonus structure, arguing that it misaligned with company performance. These cases underscore a broader movement among investors demanding more transparency and alignment between executive pay and corporate outcomes.

Weizer criticised

Playtech’s leadership, however, defends the proposed plan. In an earnings call, Weizer characterised it as an “incentive plan” designed to align management’s interests with those of shareholders by promoting company growth. Playtech emphasised that a group of shareholders representing 34.4 percent of the company’s stock have already committed to voting in favour of the plan, and the company continues to engage with other investors behind closed doors. A vote on the proposal is expected by the end of November.

Sale of Snaitech

The sale of Snaitech marks a significant milestone for Playtech, which acquired the Italian business for €846 million in 2018. Flutter’s €2.3 billion offer represents a 16.5 percent premium on Playtech’s share price prior to the announcement. As part of the deal, Playtech will return between €1.7 billion and €1.8 billion to shareholders as a special dividend, a move that was initially welcomed by the market. However, shares in Playtech dipped over 5 percent following the deal’s announcement, a reaction some analysts attributed to the controversial bonus proposal overshadowing the positive aspects of the sale.

Corporate governance in the spotlight

This situation is not isolated to Playtech. Several other gaming and gambling companies have faced shareholder revolts over executive compensation in recent years. For instance, Entain, another major player in the online gambling industry, experienced a backlash when shareholders opposed a pay plan that included large bonuses for the executive team, despite the company’s underperformance at the time. Such incidents have sparked broader discussions about the governance practices within the gambling sector, where executive pay often seems misaligned with shareholder returns.

History of a key player in gaming technology

Founded in 1999, Playtech has grown into one of the leading software providers for gambling operators worldwide, offering a range of products from online casino games to sports betting platforms. The company went public in 2006, and it has been involved in various high-profile mergers and acquisitions, most notably the purchase of Snaitech in 2018. Over the years, Playtech has faced several challenges, including regulatory scrutiny and market competition, but it remains a key player in the gambling technology landscape.

Despite its market presence, Playtech has struggled to maintain consistent shareholder returns in recent years, and the company’s stock has lagged behind the broader FTSE 250 index since 2018. This has fuelled criticism of the proposed bonus scheme, with many arguing that the management should focus on improving long-term company performance rather than pushing for short-term rewards.

What’s next ?

The proposed bonus scheme at Playtech highlights ongoing tensions between executive pay and shareholder interests in the gaming industry. With a shareholder vote looming, the outcome of this saga could have wider implications for corporate governance in the sector. The key question remains: will Playtech’s leadership manage to convince shareholders that this bonus structure is necessary for the company’s growth, or will investor backlash lead to a rethink of the strategy?

The case also sheds light on the broader challenges faced by gambling companies as they navigate increasing scrutiny over executive pay, governance, and accountability.

Expect further developments as shareholders prepare to cast their votes in the coming weeks, which will ultimately determine the future direction of Playtech and its management team.

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