WPP, the world's third largest advertising company, said last week as it reported healthy interim profits that it would start a scheme to match hefty payouts by its bigger US rivals.
Executives at the agency, which had to change an earlier scheme after shareholders complained, will have to put up $20m of their own money, with half from chief executive Martin Sorrell.
They will reap up to $100m five years later if the company ranks first or second among the world's top 15 advertising groups in total shareholder return.
"The new scheme contains most of the elements Hermes had been advocating," the investor, which has shown in the past it is willing to use its weight as a substantial shareholder to influence corporate decision making, said in a statement.
"Most importantly, the new scheme depends on performance against a peer group, unlike a conventional share option scheme that rewards executives for a bull market and offers them no incentive in a bear market."
Hermes, with 1.2 per cent of WPP, said it still had reservations about some of the WPP board, but this was a separate issue. It did not elaborate. Other major shareholders were not available to, or declined, comment.
Separately, WPP yesterday agreed to acquire Mediaquest SARL, a Paris- based Internet advertising firm which had net assets at the end of last year of 1.9m French francs (pounds 190,000), to expand its online business.
Terms of the transaction were not disclosed.
Founded in 1995, Mediaquest clients include France Telecom, Electricite de France and LVMH Moet Hennessy Louis Vuitton. WPP said it is buying the company through its OgilvyOne Worldwide strategic planning and market research operation, a unit of Ogilvy & Mather Worldwide.