The Gambler by William C. Rempel

Author:William C. Rempel
Language: eng
Format: epub
Publisher: HarperCollins
Published: 2018-01-23T00:00:00+00:00

The MGM special dividend of 1973, the $5.25 million that rescued Kirk from default on a German loan and saved his kingdom, remained a legal point of contention into 1977. Sporadic settlement talks had come down to one issue: How much was Kirk going to pay to end the lingering litigation? Lawyers for the plaintiff shareholders suggested that Kirk pay back some of the corporate fees he received as MGM vice chairman, director, and executive committee member.

One big problem with that: Kirk always refused such compensation. He felt that as a major stockholder he should benefit only from his investment, that taking a fee for helping to manage his own investment was, well, inappropriate—and unfair to stockholders. He didn’t accept “comped” rooms or free meals at his hotels, either. He had always insisted on paying his own way with personal funds out of his Tracinda accounts.

But the suggestion that Kirk should give up compensation that he didn’t even receive gave one of his advisers an idea. Terry Christensen took Kirk aside and proposed that the MGM board authorize both onetime and continuing compensation, funds that would legally bind the corporation but that would not be paid. “But they can be surrendered,” the lawyer said, considering the notion a brilliant tactical ruse.5

“Absolutely not,” Kirk said. “I don’t want to be paid.”

“But you won’t get any of it,” Christensen explained. “It’s authorized, not paid.”

“I don’t like it. I don’t like how it looks.” Kirk was adamant.

“But it will help the company,” argued Christensen.

Kirk’s lawyer was confident that creating some sort of settlement bait could end the very real risk of a costly court battle with an uncertain outcome. Asserting that the stockholders would benefit finally made the difference. Kirk reluctantly agreed to the ploy.

“Just get it over with,” he insisted.

Months later, after shareholder lawyers formally demanded that Kirk give up his compensation, a settlement deal was reached. In December 1977, Kirk agreed to decline a board-approved $125,000-per-year “raise” retroactive to 1974, drop a $50,000-per-year salary, and forgo stock options until 1981.

On paper it appeared that Kirk was surrendering about $1.5 million in past and future compensation. It was all a mirage. Kirk still didn’t like it, but the ruse took MGM off the hook for any kind of corporate penalty. He went along for the good of MGM.

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