See More, Pay More â€" The IMAX Management Experience
IMAX Corporation announced last month that Bradley Wechsler would step down as Co-Chief Executive Officer, effective April 1, 2009, and would assume the position of Chairman of the Board. Wechsler's alter ego in the shared chairman and CEO positions, Richard Gelfond, will assume full responsibility for the CEO job and relinquish his role of Co-Chairman. The changes, however, bring about new compensation arrangements that might be viewed as somewhat extravagant.Wechsler's pay for holding the corporate gavel: $200,000 in cash per year plus equity compensation. Gelfond's salary remains unchanged in 2009 -- $500,000 per share plus bonus and stock options. However, in January 2010, a 20 percent raise will go into effect for Gelfond, increasing his cash compensation to $600,000 per year, according to service agreements found in a FORM 8-K filed with the SEC on December 12.
On the surface, the $200,000 per year in cash compensation for the chairman of a company with $104 million in annual revenue (trailing twelve months ending September 2008) might seem a bit steep. Albeit in the case of IMAX it might be considered a bargain, as the total cash compensation for the two positions will decline to $800,000 from approximately $1.0 million in 2008. Of course, as employees of the company neither Wechsler nor Gelfond received compensation for co-chairing the board of directors. Total compensation in 2007 (the last year total figures were reported) was $3.2 million for Gelfond and $2.0 million for Wechsler, including cash, stock awards, option awards and other compensation (such as use of automobiles and payment of life insurance premiums).
One means to judge the wisdom or fairness of executive compensation is "pay for performance" metrics. Revenue rose dramatically in the September 2008 quarter, to $33.4 million, giving IMAX its first quarterly operating profit in a year. Net earnings, however, were still negative after interest expense -- and the consensus estimates reflect continued net losses through the end of 2009. Ergo, from the standpoint of its negative bottom line, executive pay looks excessive.
Although profit performance has been erratic, the Wechsler-Gelfond team with its shared work scheme has been one of the driving forces behind the success of the IMAX large-screen format (on screens up to eight stories high and 120 feet wide) for the last ten years. The IMAX management team has big plans for growth in the next two years, with 45 new digital theater systems slated for installation in 2009. In addition, recent deals signal IMAX's growing appeal to studios. Last month Imax signed a five-movie deal with Walt Disney Co. The agreement puts five Disney movies in Imax theaters beginning in November 2009 with the 3-D movie "A Christmas Carol," starring Jim Carrey.
Reporting by contributor Debra Fiakas, who does not hold a financial interest in any stocks mentioned in this article. The 10-Q Detective has a Full Disclosure Policy.