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J. Michael Pearson, Chairman of the board and Chief Executive Officer of Valeant Pharmaceuticals International Inc.

CHRISTINNE MUSCHI/REUTERS

Can a man worth $600-million (U.S.) feel down and out? Maybe so, if he was worth nearly $3-billion eight months ago.

We are speaking of Michael Pearson, the chief executive officer of Valeant Pharmaceuticals International Inc., who has seen his wealth erode along with many of his shareholders.

The Globe and Mail traced Mr. Pearson's holdings late last July, just days before Valeant stock hit its NYSE peak of $263.81, versus Tuesday's NYSE close of $65.45. (Its TSX high was $347.84 [Canadian], compared with Tuesday's close of $87.94.) Mr. Pearson, who resides in New Jersey, has been compensated over the years in the U.S.-based shares through a combination of stock options, restricted shares and a performance-unit program that has yielded millions of shares of stock over the years. At the time of that July 30 story, he had holdings that exceeded $2.8-billion (U.S.) and were continuing to head north.

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Little has gone right since, with a series of controversies over the company's drug pricing, overall business model, and its accounting and disclosure. Mr. Pearson, too, spent several weeks in hospital with severe pneumonia and only returned to work Monday.

Monday's news that Valeant received a subpoena from the Securities and Exchange Commission sent the company's shares tumbling again; at one point Tuesday, they fell below $60 on the New York Stock Exchange, less than 25 per cent of their peak value last August.

Now, The Globe calculates Mr. Pearson's holdings at roughly $600-million.

In November, Mr. Pearson's brokers at Goldman Sachs forced him to sell more than $100-million in shares that he'd pledged to cover loans he took out to support his charitable giving, purchases of Valeant stock and his tax bills. The Goldman Sachs sales reduced his outright holdings in the company to about 1.5 million shares, meaning his direct ownership has fallen from more than $500-million to about $100-million at Tuesday's prices. (Mr. Pearson has also placed 1.2 million shares, now worth $80-million, in a trust that he says he does not benefit from.)

His unused stock options, worth roughly $1.2-billion last summer, now offer about $265-million in potential profits. (While 500,000 options that Valeant gave Mr. Pearson in 2011 are dangerously close to being unusable at current market prices, he also has almost three million options with an exercise price of just $4.20 apiece, offering about $180-million in profits.)

Valeant's performance-share program is more complicated than most. Valeant has given Mr. Pearson awards in 2008, 2009, 2011 and 2015. In each case, each of the performance-share units can turn into multiple shares of common stock if Valeant hits certain thresholds for annual returns. For most of Valeant's history, the stock blew past those mileposts, and Mr. Pearson's awards turned into the maximum number of shares.

In a twist, however, those shares have "vested," but they have not been "delivered" to him, per a series of employment agreements that have restricted Mr. Pearson from selling any Valeant shares. He has watched, therefore, as these vested but undelivered shares have fallen from nearly $800-million, by The Globe's estimation, to more than $200-million.

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In its 2015 proxy statement to shareholders, Valeant explained that its compensation philosophy "is to align management's pay with long-term [total shareholder return] … We richly reward for outstanding TSR performance, but pay significantly less for below-average TSR performance."

Valeant is now experiencing below-average TSR performance. And Mr. Pearson is no longer as well rewarded as before. At $600-million, however, we can safely say that he is still rich.

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