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corporate governance

Miles Nadal, former chairman and chief executive officer of MDC Partners Inc., speaks at the annual Milken Institute Global Conference in Beverly Hills, California, U.S., on Tuesday, April 29, 2014.Patrick T. Fallon/Bloomberg

Miles Nadal, one of Canada's most richly rewarded CEOs, has abruptly resigned from MDC Partners Inc., the Toronto-based advertising conglomerate he founded three decades ago. The publicly traded company also revealed late Monday Mr. Nadal will return $10.6-million (U.S.) in past retention payments and $1.9-million in expenses, in addition to the $8.6-million he agreed to repay last spring, upping the amounts payable to the company to more than $20-million.

The exit of the colourful entrepreneur and community benefactor is the biggest in a string of changes at the top of the company amid a wide-scale investigation by the U.S. Securities and Exchange Commission into its pay and accounting practices and trading in the company's securities. The company's chief accounting officer, Michael Sabatino, has also resigned, agreeing to repay more than $200,000 in cash bonus payments covering 2012 to 2014, the company said.

"I'm gratified knowing that after 35 years, I am leaving the Company in a strong position, with brilliant partners, exceptional talent, dedicated employees, wonderful clients, a strong shareholder base, and an incredible culture and reputation," Mr. Nadal said in a statement. "I have every confidence that the Company's deep leadership team will build on this strong foundation in the years ahead."

Last month MDC said it was kicking two other company executives off the board and that it had engaged Spencer Stuart to find "two to four new highly qualified independent directors" to join. At the same time it announced two independent directors, Clare Copeland and Senator Michael Kirby, would depart before the end of their current term next June. The moves came after nearly 50 per cent of shareholders voted against the board's "say on pay" recommendation to approve compensation packages for top executives, including Mr. Nadal.

MDC said Scott Kauffman, a company director for the past nine years, will replace Mr. Nadal as CEO and chairman. In a statement, Mr. Kauffman commended Mr. Nadal's "vision and leadership," adding MDC "would not have achieved the exceptional success we enjoy today" without him and that he leaves it "in a very strong financial and operational position."

Mr. Nadal, 57, whose name graces a popular community centre on Bloor Street in Toronto, agreed this year to repay millions in perquisites and payments from 2009 to 2014 covering a host of items including travel, medical expenses and even charitable donations, as well as "certain expenses for which the information was incomplete." It is unclear whether the company financed bequests to community organizations that now bear his name. Mr. Nadal will receive no severance under the terms of his separation agreement signed Monday.

This is the latest in a string of controversies linked to MDC's governance and the exorbitant pay for Mr. Nadal, who has never been shy about his opulent lifestyle (his former 80-foot yacht, Dare to Dream, even had its own website). Two directors left the board in the early 2000s after raising concerns about his pay, which typically amounted to millions of dollars each year even as the company posted wildly uneven results and poor returns as it switched in and out of strategies.

MDC has found greater success in recent years buying stakes in dozens of advertising agencies. Still, Mr. Kirby acknowledged in 2012 "the board is sensitive" to concerns about the CEO's compensation, adding "I accept that" Mr. Nadal's pay is high after he earned $23.8-million in 2011.

Mr. Nadal's pay has remained buoyant as the company's stock hit new highs in the past three years. His total compensation reached $16.8-million last year and $20.7-million in 2013, making him among the highest paid Canadian CEOs despite the fact his company earned $179-million in adjusted operating earnings on revenues of $1.2-billion last year.

While Mr. Nadal and fellow directors promised a decade ago to clean up the company's corporate governance, changes announced last spring stemming from the SEC investigation suggest internal controls have gone wanting.

MDC said in April the board's audit committee "has adopted and implemented a series of remedial steps to improve and strengthen the company's internal controls and procedures regarding travel, entertainment and related steps" including "a new private aircraft usage policy." It has also hired two executives to oversee internal controls and compliance, including reviewing monthly expense reports.

MDC said Monday it still expects to meet its financial guidance of at least $1.3-billion in revenue and adjusted operating earnings exceeding $195-million this year.