Grand Exits

David Bell hasn't had a full-time job for four years now, but it's unlikely that Bell, 66, waits at the mailbox for his Social Security envelope.Bell retired as CEO of Interpublic Group over four years ago, but, according to an SEC filing, this year the company will pay him $750,000 to be a part-time consultant. Bell was hardly what you'd call a "lifer" at Interpublic. When he relinquished his co-chairmanship in 2006, he had worked at the company just five years. But Bell's contract ensured that he would draw a salary for another five, and after Michael Roth replaced him as CEO, that's just what he did.In the world of gold-plated exit packages, Bell's story is not unique. Take, for example, the cases of Brendan Ryan and Stephen Gatfield. Ryan passed the reins of Foote, Cone & Belding to Steve Blamer in 2005, but IPG (which declined to comment) now pays him half a million dollars a year to do part-time work, say sources. Former CEO Gatfield left the corner office at Lowe Worldwide in June 2009, but he still pulls in $400,000 annually as a part-time consultant, according to an SEC filing.Industry watchers say guys like this are increasingly the last of their kind -- veterans of an industry that looks a lot different today than it did just a few years ago. Talented and successful as these CEOs were, they've entered "retired" life with the kind of severance packages that today's leadership will probably never see. (Some, like former McCann Worldgroup chief John Dooner, got in under the wire -- and benefitted handsomely. More on that in a minute.)How did these guys land such great deals? The stories vary. Bell and Ryan were essentially in the right job at the right time. These chiefs served relatively brief terms within IPG, but their pay packages were enshrined by an acquisition.Both men had the good fortune of holding top posts at True North Communications, a company that IPG coveted back in 2001. Bell was CEO of True North, and Ryan served as the head of its largest global network, FCB. Hence, if IPG was to satisfy its lust for Truth North, it had to match -- if not sweeten -- the contracts that each chief had at the time. In essence, the long-term employment that Bell and Ryan would enjoy after their tenures was simply part of the $2.1 billion that IPG paid to acquire the company.But legacy deals like this are not limited to acquisitions. Consider the case of Michael Patti. In 2003, WPP Group and Young & Rubicam were trying to woo Patti (then at Omnicom's BBDO) into taking the job of worldwide creative director, chairman and CEO of Y&R's New York office. To snare him, WPP had to match an exceptional contract that was enjoyed by Patti and a select group of 10 to 15 other executives. Patti ended up taking the deal, and when he exited Y&R at the end of 2006, WPP was on the hook for paying him 100 percent of his annual salary (estimated in the $1 million range) until 2016, say sources. WPP declined to comment on Patti's generous exit package.According to sources, the percentage was set by company brass, and the payment term stemmed from a combination of age and years with the company. Patti was well positioned in both cases. A filmic creative known for Pepsi's celebrity studded spots and the legendary "It's not TV, it's HBO" campaign, Patti had logged 18 years at BBDO when he left for Y&R. And while Patti's compensation package had been designed as a form of pension at BBDO, it became, in effect, severance pay from Y&R -- pay that went to an exec who was only in his early 50s at the time of his departure.The generosity of the compensation package that BBDO developed and Y&R inherited was all about keeping top talent happy -- and away from the competition. According to a source who declined to be identified, the kind of package Patti enjoyed was "always conceived as something which would make it very hard for other people to steal you, but also reward you in your retirement and keep you out of the game."The high price tag for creative leaders underscores what IPG recruiting consultant Brian Brooks terms a "silver bullet" scenario: A struggling agency knows that it needs transformational talent to turn itself around and that talent is not cheap. Industry lawyer Rick Kurnit of New York firm Frankfurt Kurnit Klein & Selz adds that despite the upheaval of recent years, the ad business is "still driven by clients needing the big idea, the great creative, the strategic concept that works across all platforms and fits within media strategy. The people who do that have a certain genius, and you can't define the value of genius by anything other than really the marketplace."But while the need for (and expense of) the best creative talent may be a constant, the BBDO deals and the contracts of Bell and Ryan were forged in a more prosperous era, a time when operating margins were high and greed -- as Gordon Gekko famously put it -- was good. Back then, clients tended to be less fickle and more loyal, justifying the cost of lavish compensation packages as "insurance" against big clients defecting."The business has changed since the early '80s when I started," Kurnit says. "You had essentially privately owned agencies, a group of people that expected to work together throughout their entire careers and people being treated well into retirement for the sake of the morale of the people who remained, who all toiled together for a long time."How things change. Today, profits rest on cost savings, and, with many agencies now under public ownership, a lavish pay package is likely to raise howls of shareholder protest. Clients tend to spend less, and some conduct reviews in part to drive down the fees of agencies, which essentially are "vendors" in the eyes of many client procurement departments. The current generation of agency leaders can expect severance packages that last six months to a year or maybe two -- but certainly not 10. Pension programs have largely vanished. As one agency source puts it: "Companies are being more conscious of what they do and how they spent their money."IPG, for example, discontinued a long-term pension plan known as the Executive Special Benefits Agreement in 2003. But even though the plan, which started in 1982, hasn't enrolled anyone in seven years, dozens of regional and global leaders got in under the wire and therefore will benefit when they exit. Case in point: Dooner (pictured), former CEO of IPG's McCann Worldgroup.On March 31, Dooner shifted to chairman of Worldgroup as new CEO Nick Brien took over. Dooner, 61, will be paid $2.5 million annually for the next 15 years thanks to the old ESBA plan under which he set aside portions of his salary that, sources say, IPG used to buy annuities that will help fund his compensation. According to an SEC filing, Dooner had five such set-asides during his nearly four-decade-long career within IPG, which accounts for the dollar amount and length of time. The payments will begin in March 2011, after Dooner leaves the chairman's seat. A Little Something for the TroopsBy Noreen O'LearyBack in the old days, a perk at an ad agency (say, writing off some of those martini-laden lunches) was something reserved for the corporate suits. But things have changed. Today's agency rank and file -- the young, socially aware progenitors of an idiosyncratic work culture -- are enjoying an increasingly odd and colorful array of extras, perhaps as partial compensation for the one thing that hasn't changed about the industry: the long hours and modest pay.At JWT New York, for example, staffers enjoy free beers on "keg night" every Wednesday and Thursday at the agency's in-house bar. At TBWA\Chiat\Day, L.A., staffers can bring their dogs to an office equipped with its own dog run. Industry watchers say that this sort of creative coddling is an outgrowth of Millennial-generation employees who want to shape their jobs around their lives, not the other way around. Some firms, for instance, offer their workers sabbaticals (paid and unpaid) to do volunteer work or donate blood.Of course, there's more than corporate progressivism at work here. When the recession took a bite out of profits, many employers found that lifestyle perks were a more affordable option than the usual roster of profit-sharing and 401-K matching benefits. "We're seeing agencies trying to find ways to give employees more quality-of-life perks," says Nancy Hill, president of the 4As. "These are the sort of things that are meaningful and don't cost a lot."Crispin Porter + Bogusky probably best exemplifies how a young workforce has shaped the standard package of job perks. Known for its long workdays, the agency employs full-time "concierges" in its Miami office to run errands for staffers tied to their desks. In Boulder, employees can avail themselves of the company's stash of snowboards, bikes and camping gear. "Obviously the industry has changed a lot," says COO Eric Lear. "Kids coming out of school are looking for something different. As long as you compensate them fairly and give them health benefits and a 401k, there are other intangibles that matter a lot to them."The perks have benefits for the agency, too, in terms of the talent it attracts. Crispin gets an average of 2,000 resumes each month.

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Grand Exits

Andrew McMains

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Andrew McMains