Dear Fellow Pinnacle Entertainment, Inc. Shareholders:
We
are writing to urge you to support a
proposal that we believe will strengthen corporate
governance at Pinnacle Entertainment, Inc. (the "Company"). The proposal requests the Board of Directors
take the necessary steps to adopt an
annual advisory vote by shareholders on executive
compensation. A full description of this
proposal follows below. We believe that this reform will promote
shareholder value and increase management accountability. In our view, these reforms are especially important in light of the Company's disappointing results:
Our
Company's stock has substantially underperformed the Dow Jones US
Gambling Index. According to the Company's most recent Form 10-K filed
on February 26, 2010 (the "10-K"), a $100 investment in our Company's
stock at the end of 2004 would be worth only $45.40 at the end of 2009.
During this five year period, an investment in the Dow Jones US
Gambling Index (including dividend reinvestment) would have declined in
market value by 29%, whereas an investment in our Company's stock would
have declined 55%.
Our
Company's financial performance has deteriorated over the past two
years. The Company suffered a $258.3 million net loss in 2009 and a
$322.6 million net loss in 2008. A significant portion of these losses
is attributable to our Company's investment in Atlantic City, New
Jersey and the Company's subsequent decision to suspend development of
this property. Over the past two years, the Company has recorded a
total of $356.7 million in impairment of land and development costs
related to this project. (Company 10-K).
Our
Company recently underwent a difficult CEO succession process. Former
Company Chairman and CEO Daniel Lee resigned after the Missouri Gaming
Commission launched an investigation to determine whether Mr. Lee had
threatened an elected official over a casino zoning vote. ("Pinnacle
CEO resigns,"St. Louis Business Journal, November 9, 2009).
After operating for four months with an interim CEO, the Company hired
Anthony Sanfilippo as CEO. (Company Press Release, March 15, 2010).
Our
Company is losing a potentially valuable gaming license for one of its
casinos in Saint Louis, Missouri. On January 27, 2010, the Missouri
Gaming Commission issued a preliminary order to revoke the Company's
gaming license for the President Casino. The preliminary order alleged
that the President Casino's offerings and revenues had been
purposefully downgraded. (Company 10-K). The Company agreed to settle
the preliminary order by surrendering the President Casino's gaming
license. (Company Press Release, March 10, 2010).
In
light of these facts, we believe that the Company would strongly
benefit from instituting a
corporate governance reform that promotes greater accountability to
shareholders. In our opinion, adoption of this
proposal will cause the Company's management and directors to better
focus on the central goal of restoring shareholder value at the Company.
WE RECOMMEND THAT YOU VOTE "FOR" THE FOLLOWING PROPOSAL.
ANNUAL ADVISORY VOTE ON EXECUTIVE PAY
ITEM #4 ON THE AFL-CIO'S BLUE PROXY CARD
Shareholders
are asked to consider and vote upon a resolution to recommend that the
Board of Directors take the necessary steps to adopt an annual advisory
vote by shareholders on executive compensation:
RESOLVED:
The stockholders of Pinnacle Entertainment, Inc. (the "Company")
recommend that the Board of Directors adopt a policy requiring that the
proxy statement include a proposal, submitted and supported by the
Board of Directors, seeking an advisory vote of shareholders to ratify
and approve the report of the Compensation Committee and the executive
compensation policies and practices described in the Company's
Compensation Discussion and Analysis.
Supporting Statement
We
believe that investors are increasingly concerned with executive
compensation issues including the overall size of executive pay
packages and whether executive pay incentives are aligned with the
interests of shareholders. If implemented, this proposal will give our
Company's shareholders a "say-on-pay" by requiring a non-binding vote
on executive compensation packages at each annual meeting of
stockholders.
In
our view, our Company's stockholders have a strong interest in linking
executive compensation to performance given our Company's poor stock
performance over the past five years. Submitting our Company's
executive compensation practices to an annual advisory vote would give
the Board of Directors useful information about whether our Company's
stockholders approve of how our Company pays its senior executives.
The
United Kingdom, Australia, the Netherlands, Norway and Sweden have
adopted statutes requiring shareholder votes on executive compensation.
("'Say-on-Pay': Linking Executive Pay to Performance,"New York Law Journal,
September 24, 2008). The U.S. Treasury has proposed legislation to
Congress to require that all U.S. publicly traded companies give
shareholders a "say-on-pay." ("Administration's Regulatory Reform
Agenda Moves Forward: Say-On-Pay," US Department of the Treasury, July16, 2009).
Many
companies in the United States have started to submit their executive
compensation practices to a vote by shareholders. Two dozen companies
have voluntarily agreed to conduct say-on-pay annual votes. And more
than 300 financial companies who received financial assistance from the
Troubled Asset Relief Program have been required to hold "say-on-pay"
votes under the American Recovery and Reinvestment Act of 2009. ("2009
RiskMetrics Group Postseason Report," RiskMetrics Group, October 2009).
We
believe that a "say-on-pay" vote is particularly warranted at our
Company given its past executive compensation practices. In 2009, our
Company paid its former Chairman and CEO Daniel Lee approximately $4.5
million in total compensation, including a $2.8 million severance
payment. In 2008, Mr. Lee received nearly $5.5 million in total
compensation. (Company Preliminary Proxy Statement filed April 2,2010). In our opinion, these high compensation levels were
inappropriate given our Company's poor stock price performance during
this two year period.
We
disagree with the Company's assertion that an advisory vote is not an
"effective way to communicate stockholder opinions regarding executive
compensation." (Company Preliminary Proxy Statement filed April 2,2010). In our view, a "say-on-pay" vote would encourage the Board of
Directors to be more proactive in seeking out shareholders' views
regarding executive compensation matters. We believe that the Board of
Directors should not passively wait for shareholders to raise concerns
before the Board of Directors takes necessary actions.
We
believe that our Company's Board of Directors has been too slow to
adopt best practices in executive compensation. For example, the
Compensation Committee of our Company's Board of Directors only
recently adopted a policy against paying executives certain tax
gross-ups. This policy was adopted after the AFL-CIO notified the
Company that it intended to solicit proxies for a proposal regarding
this issue. (Company Preliminary Proxy Statement filed April 2, 2010).
As described below, the AFL-CIO has since withdrawn the proposal on tax
gross-ups.
BACKGROUND INFORMATION ABOUT THE SOLICITATION
On
February 2, 2010, the AFL-CIO notified the Company that it intended to
solicit proxies at the Company's 2010 annual shareholder meeting for
the above proposal urging an annual advisory vote on executive pay and
for three additional proposals requesting that the Board of Directors
take the necessary steps to:
amend the bylaws to require that an independent director serve as Chairman,
amend the bylaws to require that directors be elected by a majority of votes cast, and
adopt a policy to prohibit certain tax gross-up payments to executives and directors.
The
AFL-CIO withdrew these three additional proposals in response to
certain changes made by the Board of Directors. On March 29, 2010, the
Board of Directors amended its Bylaws to provide for majority voting in
director elections, and to prohibit the Company's Chief Executive
Officer or any other current employee of the Company from being elected
as Chairman of the Board. (Company Form 8-K filed April 2, 2010). The
Company has also disclosed that the Compensation Committee of the Board
of Directors has adopted a policy prohibiting certain tax gross-up
payments. (Company Preliminary Proxy Statement filed April 2,2010).
I. VOTING PROCEDURES:
PLEASE USE THE ENCLOSED BLUE PROXY CARD TO VOTE FOR OUR PROPOSAL. YOU SHOULD ALSO HAVE RECEIVED A PROXY CARD
FROM MANAGEMENT. IF
YOU SUPPORT OUR PROPOSAL, DO
NOT SEND BACK MANAGEMENT'S CARD UNLESS IT LETS YOU VOTE FOR
THIS PROPOSAL. ANY PROXY CARD YOU HAVE SIGNED IS CANCELLED
OUT BY SUBMITTING A LATER-DATED PROXY CARD.
We
intend to solicit at least a majority of the voting power of the
Company's outstanding stock. In order to vote for our proposal, you will need to return our proxy card
unless management gives you the specific opportunity to vote for or
against this proposal on its proxy card. A proxy vote may be revoked any time prior to the shareholders meeting by signing and submitting a later dated
proxy card, by sending written notice of revocation to the proxy
holder, or by appearing at the meeting and voting in person.
The
record date for eligibility to vote is March 15,2010. As of such date there were 60,211,186 shares
outstanding. We are not nominating candidates to the Board,
nor will we seek any discretionary voting authority for the meeting,
meaning that we will vote all proxy cards strictly as you direct, and
if matters come up on which you have not given us instructions, we will
not vote your shares on those matters. We do not anticipate any matters
to be raised at the meeting other than what are already in the
Company's proxy statement, as the Company's bylaws require advance
notice be given management of any matters to be raised at the meeting.
The Company is proposing to amend its incentive plan and seeks
ratification of Ernst & Young as its auditors. We make no
recommendations on such proposals. We incorporate by
reference all information concerning these proposals, the board of
directors and voting procedures contained in
management's proxy statement at pages 1-18 and 47-58.
II. INFORMATION ABOUT THE PARTICIPANTS IN THIS SOLICITATION:
This
solicitation is made by the AFL-CIO and its employees, agents or
persons who are authorized to act on the AFL-CIO's behalf, none of whom
will receive additional compensation for this solicitation. The AFL-CIO
is a federation of 57 labor unions who represent 11.5 million union
members. The AFL-CIO is the record and beneficial
owner of 600 shares of the Company's common stock. The AFL-CIO
has no other known direct or indirect interests in the finances of the
Company, but believes it likely that affiliated unions of the
AFL-CIO and their affiliated pension and employee benefit funds alsoown stock in the Company. The
AFL-CIO Office of Investment, a department of the AFL-CIO, provides
research and assistance in support of shareholder advocacy and
corporate governance initiatives by collectively-bargained pension and
employee benefit funds. The AFL-CIO and the AFL-CIO Office of
Investment are located at 815 16th Street, NW, Washington, D.C.20006.
One
of the unions affiliated with the AFL-CIO is UNITE HERE. UNITE HERE is
a labor union representing casino, hospitality and service workers in
North America. UNITE HERE is a record owner of 330 shares of the
Company's common stock. UNITE HERE has a labor dispute with the Company
as described in the Company's Form 10-K dated February 26, 2010. UNITE
HERE's affiliate in St. Louis, Missouri represents certain workers at
the President Casino (owned by the Company) and began negotiating a
collective bargaining agreement at HoteLumiere (also owned by the
Company) in 2008. In May 2009, the Company notified UNITE HERE that the
agreement for HoteLumiere was no longer in effect and that the
collective bargaining agreement for the President Casino was being
terminated. In response, UNITE HERE filed unfair labor practice charges
with the National Labor Relations Board (the "NLRB"). In August 2009,
the Company rejected a proposed settlement with the NLRB. The NLRB is
considering whether to seek an injunction. UNITE HERE is not
soliciting proxies in this matter nor paying anything additional to
AFL-CIO for this solicitation (it like all AFL-CIO affiliates pays a
regular per capita payment to the AFL-CIO), and accordingly we do not
believe it constitutes a participant in this solicitation. Regardless of the outcome of the labor dispute,
AFL-CIO will vote all proxies received in accordance with the
instructions of the shareholder providing the proxy card. We do not
seek your support in labor matters, and do not believe that the
adoption of the AFL-CIO's shareholder proposal will have any impact on such matters.
The
AFL-CIO will bear all costs in connection with this solicitation and
will not seek reimbursement of the costs of the solicitation from the
Company. Proxies will be solicited by mail, electronic mail, the
Internet, telephone, facsimile and in person. The AFL-CIO will
reimburse banks, brokers, and other custodians, nominees or fiduciaries
for reasonable expenses incurred in forwarding proxy material to
beneficial owners. Costs incidental to this solicitation, including
expenditures for printing, postage, legal and related expenses are
expected to be approximately $10,000.
III. YOUR RIGHT TO MAKE SHAREHOLDER PROPOSALS
If
a shareholder has owned more than $2,000 worth of stock for more than a
year and meets the other criteria of Rule 14a-8 of the Securities
Exchange Act of 1934, he or she then has a legal right to have a
proposal appear in management's proxy statement and card. The deadline
for shareholders to submit proposals for inclusion in management's
proxy statement for the 2010 annual meeting of stockholders was
December 16, 2009.
IV. EXECUTIVE COMPENSATION/SECURITY OWNERSHIP OF MANAGEMENT AND 5% OWNERS
We incorporate by reference the information contained in management's proxy statement at pages 11-55.
IF YOU HAVE ANY QUESTIONS, PLEASE CALL THE AFL-CIO OFFICE OF INVESTMENT AT (202) 637-3900.
for the Annual Meeting of Stockholders of Pinnacle Entertainment, Inc.
The
undersigned hereby designates Daniel Pedrotty and Brandon Rees, or
either of them, with full power of substitution, as the proxy of the
undersigned for the sole purpose of voting all stock of the undersigned
in the manner marked below at the Pinnacle Entertainment, Inc. annual
meeting of stockholders for 2010. This proxy card grants no
discretionary voting authority: if matters come before the meeting
other than the items below, the stock of the undersigned will not be
voted on such matters.
1. ELECTION OF DIRECTORS
[ ] FOR ALL NOMINEES.
[ ] WITHHOLD ALL NOMINEES
[ ] WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE. WRITE NAME(S) OF NOMINEES BELOW:
AFL-CIO MAKES NO RECOMMENDATION ON THE DIRECTORS ELECTION
2. Management Proposal to amend the Company's 2005 Equity and Performance Incentive Plan.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
AFL-CIO MAKES NO RECOMMENDATION ON THIS PROPOSAL.
3. Management Proposal to ratify appointment of the Company's independent auditors for the 2010 fiscal year.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
AFL-CIO MAKES NO RECOMMENDATION ON THE RATIFICATION OF THE AUDITOR
THE AFL-CIO URGES A VOTE FOR THE FOLLOWING SHAREHOLDER PROPOSAL:
4.
To recommend that the Board of Directors take the necessary steps to
adopt an annual advisory vote by shareholders on executive
compensation.
FOR THIS PROPOSAL:
AGAINST THIS PROPOSAL:
ABSTAIN:
If
no direction is made above, AFL-CIO will vote this card FOR the above
shareholder proposal (Item #4)
and not vote in the election of directors (Item # 1) nor on auditor ratification or incentive plan amendments (Items #2 and 3).
