Steven Crist: NYRA offering little pay for big job

Can the New York Racing Association secure the right person as its next chief executive at a discounted price and with no job security beyond the next two years?

That was the most interesting question to emerge from the latest meeting of the new state-controlled NYRA Reorganization Board, which held its third meeting last Wednesday.

The issue of executive compensation has been a perpetual bone of contention between NYRA and its critics in government, reflecting two radically different views of the organization. The base salary for the position for NYRA’s previous CEO, Charles Hayward, had risen to $460,000 by the time he was dismissed by the NYRA board last May. A variety of politicians had criticized the salary as excessive in comparison to the heads of other state agencies, while NYRA pointed out that the equivalent position at privately held racing companies such as Churchill Downs were worth more than double that.

What the argument really was about was the definition of NYRA: Should it be viewed as an equal and competitor with those private companies, and its employees compensated as such despite its not-for-profit status, or as a state agency with salaries more in line with those of civil servants?

The new NYRA board, according to Vincent Tese, a board member and the chair of its compensation committee, hired a consultant who told them the job was worth $600,000 to $1.1 million annually. The consultant then offered three schemes, and the NYRA committee chose and tinkered with what Tese called “the most aggressive” (that is, the cheapest) one of them: An annual base salary of $300,000, with an as yet undefined set of incentives that could add up to $250,000 in bonus pay.

“There seems to be a disconnect here,” said Len Riggio, a board member, citing the gap between the $600,000-to-$1.1 million recommendation and a guarantee of only $300,000 in base salary. Other board members wondered whether the fact that the NYRA Reorganization Board’s final mandate – to return control of NYRA to private hands in under three years, with no guarantee that this operator would retain the chief executive – would be a further hindrance.

Tese and David Skorton, the board chair, responded that those were legitimate concerns but that they thought the numbers were appropriate for attracting the right person while remaining sensitive to the perceptions of what the head of a quasi-public entity should be paid. Skorton called it “in the sweet spot for where this organization is right now” and added that “we’re turning the ship on an interim basis.”

Between the lowball base pay and the emphasis on the transitional nature of NYRA, the board seems to be saying that it is looking more for an operational leader to keep the tracks running while the board plots the future of racing in New York, rather than a visionary leader to steer that ship. The rumored candidates for the position are all former executives at private-sector tracks who could probably seamlessly take over for Ellen McClain, who is resigning her position as president and chief operating officer at the end of April.

Perhaps that is the right way to go at the right price if the new chief executive is going to be a relatively short-term choice, but the emphasis on incentives is somewhat troubling. By making up to 45 percent of the next chief executive’s compensation dependent on certain targets, the board may be encouraging short-term results at the expense of long-term goals and planning.

For example, the targets presumably would emphasize NYRA’s financial performance in a given salary year, numbers that rely heavily on total handle and retention rates. Would a chief executive with those incentives have recommended the sensible reduction in winter racing dates implemented this month? Would he embrace a reduction in takeout rates even if it took a year or two to grow handle and offset short-term losses? Would he enthusiastically court a return by the Breeders’ Cup to New York, an absolutely vital step for New York racing after an absence of nine years and counting, even if the event were a financial loss leader?

In a more perfect world, the board would find what it considers the ideal candidate and pay him what it takes to get him, rather than having an artificially low salary number to appease politicians who think a competitive salary by industry standards is too high. In the absence of that, the board must make sure that it is encouraging the kind of management and policies that will have lasting value beyond allowing a single executive to earn a bigger bonus.