WPP attempts to head off pay clash with big City investors

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The Independent Online

WPP, Britain's biggest advertising group, yesterday postponed a meeting with shareholders to vote on a controversial £112.5m pay package for its top executives, and said it would tone down aspects of the plan after the proposals were slammed by institutional investors.

WPP, Britain's biggest advertising group, yesterday postponed a meeting with shareholders to vote on a controversial £112.5m pay package for its top executives, and said it would tone down aspects of the plan after the proposals were slammed by institutional investors.

The company sought to avert the humiliation of a possible defeat over the five-year incentive plan by allowing more time to thrash out a compromise with shareholders. Under the plan, Sir Martin Sorrell, the chief executive and founder of the group, would receive up to £44m.

The EGM, at which shareholders will vote on the package, has been delayed from 7 to 16 April. WPP said that it would change some of its criteria.

The move comes after WPP received a flood of criticism from major investors in the City over the potential size of the proposed payouts and the way the plan - set to come into force this year - has been structured.

One concern is that the proposal to weight companies, which it was going to benchmark itself against, according to their size, was not sufficiently stretching, according to institutional investors.

Influential groups such as the Association of British Insurers, the National Association of Pension Funds, and Pirc, the pension shareholder group, has told WPP in the past few weeks that they had serious reservations about the plan and that their members might vote against it.

Peter Montagnon, the ABI's head of investment, said of WPP's move to avoid a bruising showdown next week: "It is constructive and addresses some major concerns. We are very pleased they have decided to postpone the meeting and hopefully it will mean they avoid a stand-up row." The NAPF said: "We have been in regular contact with the company over the past few days and this is proof that constructive engagement with companies works."

However, WPP is not assured of a smooth ride over its bonus scheme, which is called a "leadership equity acquisition plan" and applies to 19 directors and managers.

Some institutional shareholders said the proposed change to the criteria - by removing the weighting of its peer group in the advertising sector - was tinkering. A source said: "There is a significant body in the City which is against it. This is not really about the structure of the plan but about the sheer amounts involved, and the sheer amounts going to one individual."

This is not the first time that WPP has clashed with shareholders over its pay arrangements, especially those for Sir Martin. At last y ear's AGM, a substantial number of shareholders - 46 per cent - voted either against or refused to support the company's remuneration policy, which included a three-year contract for Sir Martin. The company changed the contract to one year.

WPP's move to temper at least part of its latest incentive plan comes after similar climbdowns elsewhere. Prudential last year abandoned plans to substantially increase the pay of its chief executive Jonathan Bloomer, after the strategy received an unfavourable reception in the City. GlaxoSmithKline also recently unveiled a more moderate package for Jean-Pierre Garnier, its chief executive, after it became the first UK company to be defeated by a shareholder vote over pay at last year's AGM.

WPP said in yesterday's statement it had delayed its meeting "in order to give share owners an appropriate opportunity to consider this change" to the benchmarking.

WPP sent proposals on its incentive plan to shareholders a month ago. It comes after a previous five-year scheme in which WPP's directors did not receive the maximum payout, , reaching level three out of five. It paid out £17.7m to Sir Martin.

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