The New York Racing Association finally provided me its contract with Christopher Kay, its CEO since July, 2013. I now understand why they fought tooth and nail to deny my access. Among the interesting provisions of the agreement are:
- The bonus Kay for which Kay is eligible can be higher than the $250,000 NYRA has publicly stated on several occasions;
- Kay’s “generous” automobile allowance effectively increases his base salary beyond $300,000, again an amount publicly stated on several occasions;
- An unusual severance agreement would pay Kay $550,000 even if the contract expires at the end of its term;
- The “Reorganization” Board can extend Kay’s contract beyond its own legally-mandated expiration;
- Kay is permitted to sell his “concept for an on-line lottery game;”
- While probably the result of sloppy legal work, Kay has the sole power to amend or terminate the contract.
I first requested the contract with Kay and his performance goals shortly after he was hired by the NYRA Reorganization Board. NYRA denied my efforts to obtain the contract and Kay’s performance goals. They even stated they did not have to abide by a decision of the state agency charged with overseeing the public records law.
When NYRA began its search for a new CEO in early 2013, the Board of Directors did not want the unfavorable publicity that would result from paying the new CEO more than the $470,000 reportedly paid the prior one. The Board was particularly leery because they are now a state agency, with 12 of the 17 members being appointed by government officials, including eight by the Governor. So they came up with a compensation structure that would consist of a base salary of $300,000 and a bonus of $250,000 attached to achieving performance goals.
While some might say that looks like a public relations move to increase the CEO’s pay by a healthy 17 per cent, David Skorton, the Governor’s appointee to chair the Board, assured us there would be meaningful goals and that he wanted to be “very public” about the process of determining eligibility for the bonus.
In every public comment about the bonus, including a NYRA press release, the bonus amount the CEO would be eligible for was always stated as $250,000. The contract with Kay, however, identifies this not as the maximum, but as the “target.” According to the contract terms, NYRA “may at its discretion” pay Kay a bonus “greater than the target.”
When the bonus concept was discussed at the February, 2013 Board meeting, Chairman Skorton assured us this was “not just a sneaky way to give more money.” He said there would be “actual milestones to be reached,” and that he was a “hard grader.” The chair of NYRA’s Audit Committee stressed the need to “define very specifically the parameters for the incentive comp to make sure there is no gray area.”
But as I discussed in this earlier post, there are no specifics in the statement of Kay’s performance goals. It is nothing more than a listing of general categories that could be used to develop milestones against which performance could be measured. The document is so useless that the one item that Skorton identified as being a milestone – the reprivatization of NYRA – is not even mentioned.
Then there is the automobile allowance of $1,650 per month. It is a set amount and not dependent on actual expenses. I realize that the New York City area is expensive, but yesterday’s Times had an ad for a lease on a 2014 Jaguar F-Type for only $739 per month. So Kay can get two and still have some pocket money left over. Kay’s salary has been consistently identified by NYRA officials as $300,000, so the excessive automobile allowance should be viewed – as Chairman Skorton would say – as “just a sneaky way to give more money.”
NYRA’s generosity with its CEO doesn’t end there, however, for there is a somewhat unusual severance agreement. While one would expect a severance provision in the event that NYRA decides to end prematurely their agreement with Kay, this contract provides severance if NYRA and Kay do not reach an agreement to extend the contract beyond its end date of October 17, 2015. Kind of like the way a baseball teams pays severance to a player who reaches the end of a contract without a new agreement.
A person with whom I consulted who has experience in negotiating employment contracts with executives for a non-profit was dumbstruck by this notion. If NYRA and Kay are not able to reach agreement on a new contract, Kay would get both the base payment of $300,000 and the full amount of his performance-based bonus less than four months into the year. It’s nice to start negotiations with a half-million already in your pocket.
Speaking of negotiating a new contract, why is NYRA committing to negotiating a new contract since – by law – the NYRA Reorganization Board ceases to exist on October 17, 2015? A successor to this NYRA would then be liable for paying Kay $550,000 even if they decide to hire a new CEO. And this is a Board that talks about putting NYRA in a solvent position, a goal not advanced by saddling its successor with potentially a half-million dollar loss right off the bat.
In another interesting provision of the contract, NYRA has agreed that Kay can profit from a “concept for an on-line lottery game” that he has developed, apparently even during the term of his contract. It is not clear how allowing its CEO to profit from licensing competition to horse racing is in the best interests of the sport.
Finally, and I stress that this is probably the result of sloppy legal drafting, the contract can only be amended or terminated by Kay. It provides that, “No amendment … [or] termination … shall be effective unless the same is signed by” NYRA’s “President” and the “Employee.” NYRA’s President is Chris Kay and the referenced “Employee” is Chris Kay.