Larry Mizel and David Mandarich, the two top executives at Denver-based homebuilding giant M.D.C. Holdings Inc., took big pay cuts in 2011.
The total compensation for Mizel, the chairman and CEO of the parent of Richmond American Homes, fell by 61 percent to $1.735 million from $4.431 million in 2010, according to the proxy statement filed with the Securities and Exchange Commission. Mandarich, the president and chief operating officer, saw his compensation fall by 66 percent to $1.41 million from $4.145 million in 20102.
Their executive compensation fell because the company did not meet its 2011 performance goals. Mizel and Mandarich, who historically are often the highest paid executives in publicly traded companies in Colorado, neither earned bonuses nor were awarded discretionary stock options in 2011.
‘The reduction in 2011 compensation for the CEO and COO occurred largely because the Company did not achieve their 2011 Performance Goal under the Performance-Based Plan, which primarily was designed to reward improvements to the Company’s full year 2011 income statement,” according to the proxy. “This reduction in compensation should not be misunderstood as reflecting negatively on the performance of the Company’s CEO and COO, who, the Committee believes, have performed commendably in the face of historically difficult economic challenges in the industry.”
At the annual shareholder meeting last year, M.D.C. received a negative advisory shareholder vote on executive compensation. Last September, the directors and executive officers were named individually as defendants in a derivative cour action based on the negative advisory shareholder vote. In response, M.D.C.’s Compensation Committee retained Pearl Meyers & Partners, an independent compensation consulting firm to assist it in evaluating its policies and procedures relating to executive compensation. The modifications were intended to align shareholders’ interests with the company’s performance.
The proxy also noted that Mizel owns 7.8 million shares of MDC, or 15.8 percent of the company, making him the single largest shareholder. Mandarich owns 4.3 million shares or 8.7 percent of MDC. Denver-based Janus Capital Management also is a large shareholder, owning 3.7 million shares, or 7.8 percent of the company.
Mizel, in a letter to shareholders that was separate from the proxy, said M.D.C.’s goal is to return to profitability in 2012.
“At the end of 2011, our industry began to see signs of a possible recovery in the housing market and for the U.S. economy as a whole,” Mizel wrote. “Nevertheless, during 2011, our industry continued to be impacted by adverse economic conditions, including an oversupply of homes available for sale, tight lending conditions and depressed consumer demand , primarily due to low consumer confidence and elevated unemployment. These factors contribute to continued depressed operating results for our company by many measures in 2011.”
Mizel said in 2012, M.D.C. is “aggressively pursuing a goal of returning to profitability..even if overall market conditions do not improve.” He noted that during 2011, the company implemented four “core strategies,” to help achieve the goal of profitability:
- Increased its active community by 26 percent.
- Reduced general and administrative expenses.
- Evaluated and improved sales processes and organization
- Reduce capital costs.
The company’s 2012 annual meeting will be held at 10 a.m. on the sixth floor assembly room at 4350 S. Monaco St., Denver.
Contact John Rebchook at JRCHOOK@gmail.com.
