MDC Partners Will Pay Its Former CEO Almost $4 Million This Year

Agency holding companies MDC Partners and WPP are very different in terms of scale, history and influence, but they have at least one key thing in common: Each company's former CEO continues to make quite a bit of money from the business he used to run. Martin Sorrell made approximately $4 million from WPP in 2018, despite resigning just over one year ago from the company he bought in 1985 amid reports about alleged misuse of company funds. (WPP has not taken direct action against him.) That's more than his successor, Mark Read, brought in over the same period. According to MDC Partners' latest SEC documents, filed this week, ex-CEO Scott Kauffman's 2019 haul will come very close to Sorrell's total at $3.6 million even though he will not work for the company this year at all. That number consists of a cash separation payment that was part of the September 12, 2018 Succession Agreement confirming the conditions of his departure, and it's three times the $1.2 million base salary Kauffman made last year. He also would have earned an additional $1.3 million this year as part of a series of LTIP [long-term incentive plan] Equity Incentive Awards established for all top executives in 2016. As the SEC filing notes, however, these awards were all "forfeited in March 2019 due to failure to achieve the performance targets." Kauffman will continue to earn money from MDC as he remains its second-largest individual stockholder, though his 600,000 shares pale next to current CEO and chairman Mark Penn's 14.2 million. In the eight months since Kauffman stepped down, he's had his share of detractors. But none deny the gargantuan nature of the task he inherited from predecessor and MDC founder Miles Nadal, who was forced out of his own job by the SEC during a 2015 investigation into questionable spending and later forbidden from becoming an officer or director of a public company for five years. He left the company with $1.2 billion in debt, and its stock value dropped nearly 90% from December 2017 to December 2018. When asked to comment on the filing, one investor said, "I went into the wrong line of work." Others, however, credit Kauffman with preventing MDC Partners and its agencies—like Anomaly, CPB, Doner and 72andSunny—from going under altogether. [kickout id="1"] "Miles was very up and down, where Scott was very even-keel," said Jon Bond, co-founder of MDC-owned agency Forsman & Bodenfors (formerly known as KBS). "He did make MDC more sane and predictable." Kauffman, Bond noted, had never run an agency before—and the SEC filing makes this point as well, listing the many companies on whose boards he sits. "He did what he was supposed to do, and I have to commend him on that," Bond said. One must also note that, in the context of holding company CEO pay packages, $5 million is not a whole lot of money. For example, IPG's Michael Roth made approximately $17 million last year, and that total is nowhere near the $24 million John Wren of Omnicom took home in 2017, not to mention Sorrell's own Bezos-like $85.2 million payday in 2015. These numbers, and the distance between them and average employee salaries, have led to rabble-rousing that never changes much. But as Bond put it, "Kauffman came in at a moment of crisis … and created stability. This is not an exploitative amount of money for that responsibility." As for his successor's plans, MDC's first quarterly earnings call under Mark Penn is next week.