The board of Wynn Resorts is weighing its options, as the company looks to its future without former chairman and CEO Steve Wynn. The casino mogul stepped down a week ago Tuesday, after a decades-long sex scandal came to a head and rocked the company to its core.
The steps taken by the board may come down to issues of liability. On the same day that Wynn stepped down from his post, a shareholder filed a lawsuit alleging that the board of directors knew about at least some aspects of the former CEO’s sexual misconduct, and failed to do anything about it.
“[A] company spokesman confirmed that the board knew of allegations and when questioned whether the board investigated the allegations when it learned of them, did not respond to the question,” the shareholder complaint states. The complaint also says that the company was “recklessly exposed” to liability after Wynn failed to disclose a $7.5 million settlement to the board, and further alleges that the board learned of the payment by 2015 at the latest, but still did nothing.
UNLV associate professor of law Benjamin Edwards told the Las Vegas Review-Journal that corporate boards do have a responsibility to know what’s going on inside their companies. However, he added that courts understand that the extent of knowledge that any board as a whole has is, by nature, limited.
“A corporate board can never know everything, and so courts are very hesitant to hold boards responsible,” Edwards said.
According to Carliss Chatman, assistant professor of law at Northern Illinois University, the threat of that lawsuit and the potential for more in the future should be enough to get the board to take these issues seriously.
Speaking to the R-J, Chatman noted that “it would make sense for the board to figure out the breadth and depth of sexual harassment. Is it enough to get rid of Wynn or is the issue cultural and systemic?”
The board has been conducting its own investigation, though the specifics of how that’s being handled have changed over the past few days. On Monday, the special committee put in place by the board to investigate the allegations against Steve Wynn announced that it had hired the services of Los Angeles law firm Gibson, Dunn & Crutcher LLP in order to review internal company policies and procedures.
That decision came soon after the committee had determined that it no longer needed the help of O’Melveny & Myers LLP to complete its investigation into Wynn’s alleged misdeeds. A spokesman for the committee told the Review-Journal that O’Melveny and Myers had been let go because of Wynn’s resignation, as he had been the subject of the investigation.
There are many potential avenues for lawsuits to come from, whether they originate from shareholders, an investigation by the Nevada Gaming Control Board, or elsewhere. And while the chances of finding the board liable for its members’ knowledge (or lack thereof) may be slim, even the allegations that they should have known better could be damaging in terms of public perception.
Which is something the Wynn Resorts board will no doubt take under advisement as it considers its best path.