DEF 14A: Biglari Holdings Inc. Announces Annual Meeting of Shareholders

Biglari Holdings Inc. will hold its annual meeting of shareholders on April 17, 2024, to elect directors, ratify the selection of Deloitte & Touche LLP as the independent accounting firm, and consider a shareholder proposal regarding animal welfare standards.

Summary

• Biglari Holdings Inc. is holding its annual meeting on April 17, 2024, at the Majestic Theatre in San Antonio, Texas.
• Shareholders will vote on the election of five directors.
• They will also vote to ratify the selection of Deloitte & Touche LLP as the independent registered public accounting firm for 2024.
• A shareholder proposal from The Accountability Board, Inc. regarding animal welfare standards in Steak n Shake's supply chain will be considered.
• The record date for determining shareholders eligible to vote is March 4, 2024.
• The proxy statement and the 2023 Annual Report are available online at biglariholdings.com and proxyvote.com.
• Sardar Biglari, Chairman and CEO, beneficially owns approximately 66.8% of the economic interest and 71.0% of the voting interest in the company.
• In 2023, Mr. Biglari received total compensation of $8,171,055, which includes an incentive payment of $7,271,055.
• The median employee compensation was $14,712, resulting in a CEO to median employee pay ratio of approximately 555 to 1.
• As of December 31, 2023, the fair value of the company's investments in partnerships was $472,772,000.
• The company paid Biglari Enterprises $8,500,000 in service fees during 2023.

Sentiment

Score: 6

Explanation: The document is primarily informational and procedural, with a neutral tone. The discussion of compensation and related-party transactions could raise some concerns, but overall, the sentiment is moderately positive due to the company's profitability and strategic direction.

Positives

• The Board recommends voting for all director nominees.
• The Board recommends ratifying the selection of Deloitte & Touche LLP as the independent accounting firm.
• The Compensation Committee believes the company's unconventional compensation system creates less enterprise risk.
• The Board believes the service agreement with Biglari Enterprises is an efficient form of contracting.
• The Board has attempted to create a superior arrangement for investment partnerships.

Negatives

• The shareholder proposal regarding animal welfare standards in Steak n Shake's supply chain is opposed by the Board.
• The company's CEO to median employee pay ratio is approximately 555 to 1.
• The company needs to recover losses of $162,297,000 before Biglari Capital is entitled to an incentive fee from the investment partnerships.

Risks

• The company acknowledges that forward-looking statements involve known and unknown risks, uncertainties, and other important factors.
• The shareholder proposal regarding animal welfare standards could potentially impact the company's reputation if not addressed adequately.
• The company is a controlled company and relies on exemptions from certain corporate governance requirements.

Future Outlook

The document contains forward-looking statements subject to risks and uncertainties, and past results do not necessarily indicate future results.

Management Comments

• Sardar Biglari wishes that his salary remain unchanged at $900,000.
• The Board is concerned with its customers wishes, not adhering to its competitors actions or activists desires.
• The Board believes its unconventional compensation system is a rational one, creating less, not more, enterprise risk.
• The Board finds the compensation arrangements alignment of the interests of the Corporation and its founder/CEO to be far superior to that of most companies that issue stock options and awards.
• The Board believes that shareholders can ascertain the relative benefits of the service agreement by reviewing total general administrative expenses, which have declined since 2016.

Industry Context

The shareholder proposal regarding animal welfare standards highlights a growing trend among major restaurant chains to disclose and improve animal welfare policies, suggesting Biglari Holdings is lagging behind its peers in this area.

Comparison to Industry Standards

• The document notes that virtually every other major restaurant chain has published animal welfare standards and/or goals, including Bloomin Brands, Brinker, Cheesecake Factory, Chipotle, Cracker Barrel, Darden, and many others.
• The company's compensation structure, particularly the incentive reallocation to Biglari Capital, is described as superior to typical hedge fund arrangements, which often include management fees and a percentage of profits without a high-water mark or aggregation of accounts.

Related Party Transactions

• The company has a service agreement with Biglari Enterprises LLC and Biglari Capital, owned by Mr. Biglari, for certain business services.
• Biglari Capital receives an annual incentive reallocation for the company's investments in the investment partnerships equal to 25% of the net profits above a hurdle rate of 6% over the previous high-water mark.
• Shawn Biglari, Sardar Biglari's brother, is employed as Senior Vice President of Franchise Partnerships for Steak n Shake.
• Ken Biglari, Sardar Biglari's father, is a consultant to Steak n Shake.
• Robert Chapman, Bruce Lewis' brother-in-law, is employed as Chief Operating Officer of Biglari Reinsurance.

Stakeholder Impact

• Shareholders are impacted by the decisions made at the Annual Meeting, including the election of directors and the ratification of the accounting firm.
• Employees are impacted by the company's compensation policies and practices.
• Customers of Steak n Shake may be impacted by any changes to animal welfare standards in the supply chain.

Next Steps

• Shareholders are encouraged to vote on the proposals outlined in the proxy statement.
• The company will hold its Annual Meeting on April 17, 2024.
• The Board will consider any shareholder proposals received by November 18, 2024, for inclusion in the 2025 proxy statement.

Key Dates

Keywords

Biglari Holdings, Annual Meeting, Shareholders, Directors, Deloitte & Touche, Animal Welfare, Executive Compensation, Related Party Transactions, Proxy Statement, Governance