Tuesday, September 27, 2022

Surviving the titans

Besides being titans in the casino world, there’s something else that Sheldon Adelson, Stanley Ho, Lim Kok Thay and Steve Wynn have in common and this factor may lead to important regulatory repercussions for their business empires.

It baffles the mind that even the greatest companies in the world are not immune to the neglect of leadership succession planning. It isn’t so much where someone forgot to cross a ‘t’ or dot an ‘i’ but rather a topic that is usually disregarded because of the sensitivity of the subject. It is the proverbial elephant in the room, which if it isn’t raised by the incumbent leader or the company’s board, is a discourse that seldom sees the light of day.

Type-A leaders

It’s always the case that ‘the bigger they come, the harder they fall’. The bigger and more successful the company, the higher likelihood of it being helmed by a Type-A personality leader. These leaders take on a larger-than-life persona, with their name becoming synonymous with the company and even the industry sector. The media and financial analysts hail them as industry titans and as the plaudits pile up, it’s a telltale sign of potential succession legacy challenges down the road.

Mention the word ‘titan’ in the gaming industry and the names of Sheldon Adelson, Steve Wynn and Stanley Ho will come to mind for many people. Veterans in the industry might too recall the late Kirk Kerkorian, who was the father of modern Las Vegas and controlled half of the properties on the Las Vegas Strip at one point in time. But unlike the former trio, Kerkorian puts his company’s brand ahead of his own name and many wouldn’t know the renown MGM Resorts holds today is largely credited to his enterprise. Kerkorian instituted a management succession plan at MGM that saw one of the greatest generations of the company’s history with Terry Lanni as chairman, preceding their present day chief, Jim Murren.

As unassuming and humble as Kerkorian is, Adelson and Wynn are his polar opposite; brash, acerbic, with overly-dominant ids; one’s brand is his own namesake while the other’s name probably appears in the media more than his Las Vegas Sands company name. Anyone in Asia who fancies a game of chance at any one time would know of Stanley Ho, the flamboyant  ballroom-dancing ‘king’ of casinos with four wives producing 17 offspring, but the odds are quite good that a fair proportion of people aren’t even cognizant of his SJM company name.

Power vacuum

An aging Stanley Ho relinquishing day-to-day control of his Macau casino monopoly as the market underwent deregulation saw the fortunes of SJM sag under the weight of a competitive market. A decade and a half later, SJM’s market share  has shrunk to a mere 15 percent. Stanley’s long shadow had loomed large, not only over his business empire but the whole of Macau, when he ruled the roost. In fairness, he did have the foresight of a succession plan but as Jack Welch had found out at GE, the shoes were just too big to fill. With his children holding two new concession licenses, cannibalization sets in and his outmoded gaming establishments bore the greatest brunt of the fallout.

Another industry giant, Phil Satre, handed the baton for Caesars Entertainment back in 2003 to a Harvard academic who commandeered the sprawling domain from his home base in Boston and never moved in to Caesar’s Las Vegas corporate headquarters. Gary Loveman oversaw the acquisition of the company by TPG and Apollo, enriching all the top executives, but unfortunately leaving Caesars saddled with a massive $24 billion debt which led eventually to its bankruptcy.

The Atlantis Resort on Paradise Island in the Bahamas is the crown jewel of casino magnate Sol Kerzner’s gaming business. It was the gold standard, which the Singapore government used in the conceptualization for its integrated resorts industry. Widely seen as among the odds-on favorite to win one of the two Singapore IR licenses with a strong bid engineered by Sol’s eldest son, Butch, everything went painfully awry when the latter perished in a helicopter crash two months before the bid decision. The license was subsequently awarded to Genting International.

For Sol Kerzner, the loss of his scion spelled the downward spiral of his business empire and he relinquished entire control eight years on to the sovereign fund of Dubai.

It was recently revealed in court that Sheldon Adelson is undergoing treatment for non-Hodgkin lymphoma. Renowned for his hire-and-fire style, Sands senior executive floor resembles a carousel. With every single strategic decision solely dictated by Adelson himself, the void will leave the company navigating uncharted waters at its most critical moment, when it is facing its first year-on-year flat revenue in Singapore, and do-or-die license bids in Macau and Japan that will more or less shape the future fate of the company.

The forced ouster of Steve Wynn from his namesake company last year caused strong reverberations in the industry, sparking talk that the company will be broken up into pieces to be sold, with Galaxy Entertainment taking the opportunity to snap up 5 percent of the company.

Family dynasties

For the Hos in Macau, the business is a family affair where the Ho clan dots the management hierarchy throughout his casinos, hotels, real estate, transportation and other enterprises. And while the patriarch had done his utmost to prevent inheritance squabbles through early estate planning and distributing his enormous assets among his wives and children, it did not prevent the hackles from rising between relatives as he now lays debilitated in advanced age.

The late Lim Goh Tong built Genting the hard, old fashioned way and instituted the same blood, sweat and tears mantra to his heirs. In his wisdom, he too divided the fruits of his labor among his family while he is still healthy and lucid thereby ensuring a smooth transition which has seen his son, Lim Kok Thay, expand the firm beyond Malaysian shores to become one of the biggest operators in the gaming sector. With the arrival of the millennial generation in the Lim family business, we might see a tabula rasa in Genting’s strategy as the third generation young progenies, who have been bred in this age of shifting paradigms and defying conventions, begins to assume control of the business. Of late, tiny fissures have surfaced in the once-sacrosanct family solidarity with court wrangles among the younger family members over inheritance issues.

Sheldon Adelson is estranged from his remaining son, while his daughter has no involvement in Las Vegas Sands. Rather, his second and present wife, Miriam, holds more than fourfold equity than him in the company, while her son-in-law from her previous marriage, Patrick Dumont, is the CFO. Both do not figure prominently in the gaming industry by any stretch.

And for Sol Kerzner, he not only lost a son when the helicopter went down in the Dominican Republic, but arguably also the coveted Singapore casino license and the beginning of the decline of his business. The Atlantis of the East was not to be.

Regulatory repercussions

In the climate of finite casino licenses issued in gaming jurisdictions, government regulators conduct extensive due diligence to assess and review the suitability and ability of licensees. A critical track in the risk assessment of a licensee appraises the strength and depth of the core management team and the long-term vision of the company. The latter includes a review of the company’s top management culture and whether a robust leadership succession plan exists.

It is a potential red flag when a company’s vision and decision-making gravitates around a dictatorial-style leader that calls into questions its effectiveness and viability when the leader steps down. The stakes are too high for casino regulators where tenure of licenses run into decades to not err on the safe side. The opacity surrounding family-run businesses with succession by bloodline, and its propensity to implode from generation to generation is also a major cause of concern. In many cases, it is compounded further by a thin professional management team outside the family circle.

Come 2022, six invaluable concessions are up for grabs and authorities in Beijing and Macau will be more than a little concerned about the lack of leadership succession planning in some of the leading gaming corporations. More exigently, the newly deregulated Japan market will open up in the next 18 to 24 months with three new gaming licenses. Aspirants undergoing a leadership flux will have to demonstrate their wherewithal of a succession legacy in place to reassure Japanese regulators the company can deliver on the goals and promises over the course of the operating license.

Crystal ball

In stark contrast to his industry peers who mostly had seen the better of their salad days, the newly minted CEO of Wynn Resorts is Matt Maddox. Thrust suddenly into the hot seat, commentators didn’t allow him time to find his way and criticized his every misstep. But the dire predictions did not come to pass as Steve Wynn left enough depth in the management team to rally around Maddox to steer it out of troubled waters and close off a more than respectable year in 2018.

Will the tribulations Wynn experienced befall Las Vegas Sands this year if Adelson’s convalescence is prolonged? It will be interesting to see if Patrick Dumont can emulate a Matt Maddox-special to mollify the concerns of LVS investors and gaming regulators if he ascends the throne.

For the Ho family, gaming looks to continue to run in their veins. It is unimaginable that they will lose all of their present three Macau licenses come the rebid in 2022. How Lawrence Ho fares in Japan is going to be a major bellwether for the family.

Similar to the HBO hit, this ‘Game of Thrones’ is as riveting with regular cliffhangers, and hopefully less gore. Like the faithful cable viewers, we all wait with bated breath for the premiere of the next season.

*Daniel Cheng is a gaming professional-at-large who had held senior executive positions with U.S. gaming corporations, Hard Rock International and Bally International; as well as Genting International.


Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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