Miles Nadal has long had a reputation as a richly rewarded CEO who has often fared better than his shareholders. His pay package for 2011 isn't likely to dampen that perception.
Mr. Nadal, whose Toronto-based MDC Partners Inc. holds stakes in 42 advertising firms in the United States and Canada, saw his total compensation jump almost four-fold to $23.8-million (U.S.) in 2011 – a year in which MDC reported its fourth loss in five years, its operating earnings sagged sharply, and its stock fell by 22 per cent.
Mr. Nadal's total compensation was more than twice that of each of the chief executive officers of Canada's five big banks and well ahead of the leaders of significantly larger global advertising conglomerates.
Investors have questioned Mr. Nadal's compensation in the past, and some steer clear of the company for that reason.
Retired Liberal senator Michael Kirby, a member of the MDC board's compensation committee last year, acknowledged the potential investor distaste for Mr. Nadal's compensation. "Obviously the board is sensitive to that," he said, adding "I accept that" the 54-year-old CEO's compensation is high.
But committee chair Clare Copeland said: "If you look where the company came from and where it's gotten to, I don't think … his pay is out of whack with anybody else."
Mr. Kirby pointed out that MDC stock appreciated by 345 per cent over the past three years, although it had fallen sharply during the 2008-2009 global economic crisis.
He also noted that "only 10 per cent of [Mr. Nadal's]compensation is in cash … The rest is sitting out there to be earned or lost if the stock doesn't do well."
Mr. Copeland said the board was pleased with progress under its growth strategy, which saw MDC spend $150-million on acquisitions in 2010 and 2011, and build revenues by close to 80 per cent, to $943-million last year, from 2009, while debt almost doubled to $385-million. "If you decide to stop growing you can churn out profits, but we've decided to invest in the company all the way along," Mr. Copeland said.
In response to a request to interview Mr. Nadal, MDC provided a statement that pointed to the stock's appreciation in recent years, and noted that more than 90 per cent of his 2011 compensation "is tied to future stock price performance and aligned directly with shareholders' interests."
The directors argued that accounting rules distort what Mr. Nadal was paid. He received an $8.4-million "Extraordinary Equity Value Appreciation Restricted Stock Award" and a $13.1-million stock award in 2011. Both are conditional: He will receive the first award only if MDC stock trades above $20 for a sustained period.
Payment of the second award depends upon MDC reporting 5-per-cent "adjusted" operating earnings growth in 2011 and 10-per-cent cumulative growth over 2011 and 2012; even with last year's results, Mr. Nadal has already qualified for almost half of that award.
Mr. Nadal's compensation package harkens back to the pre-Sarbanes-Oxley era, when MDC was known for shoddy governance practices and richly rewarding its entrepreneurial founder, including granting him millions of dollars in interest-free loans (of which he still owes more than $5-million).
After a string of strategic shifts and acquisitions left the company groaning under debt, the income trust craze enabled MDC to spin off two of its businesses for big returns and focus on buying advertising agencies. Its board also introduced some reforms, leaving Mr. Nadal to claim that no company had better governance than MDC.