Mr Sorrell, chief executive of WPP, which owns the J Walter Thompson and Ogilvy & Mather Worldwide advertising agencies, was granted a similar contract in 1989 after the group took over Ogilvy. It was opposed at the time by one of WPP's biggest institutional shareholders, Postel, the Post Office pension fund.
Postel's chief executive, Alistair Ross Goobey, said: 'We have made it clear that we are not happy with contracts that roll for more than 12 months. There is a downward trend. I will look at Mr Sorrell's position once more after I have received the company's forthcoming annual report.
Rolling contracts are self- renewing, effectively giving the holder notice equivalent to the length of his or her contract at the moment it is terminated. That is the basis on which compensation is calculated if a director is sacked. The Cadbury committee on corporate governance called for directors' contracts to be limited to one year.
But Mr Sorrell said yesterday: 'I have no feelings one way or the other on the matter. Other institutional shareholders insisted on the contract.'
He declined to name the institutions that had called for him to be locked in, but pointed out that this happened well before the Cadbury report was published in December 1992. Cadbury's recommendations cover only contracts signed after that date.
One of the strongest institutional opponents of long directors' contracts is Mike Sandland, the chief investment manager at Norwich Union, who served on the Cadbury committee.
He said: 'I would vote against any director coming up for re-election who had a five-year contract. A rolling contract will give the recipient a predictable safety margin, and one year is a sufficient margin. Alternatively, a fixed two-year contract comes to the same thing if it is renewed every year.'
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