WPP reaches Sorrell deal

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The Independent Online
WPP, the advertising company, last night reached a compromise deal with dissenting shareholders over a controversial package for its chief executive, Martin Sorrell.

Hermes and Fleming, which had led the battle against the pounds 31.6m package, have agreed to vote in favour at Monday's extraordinary general meeting.

The compromise, worth at least pounds 2.5m less at the top end of the incentive range, would see two key changes to the proposed capital investment plan, under which Mr Sorrell was to receive as much as pounds 14.3m over five years if WPP's stock price rose to 304p.

Rather than share price performance, the company will use total return to shareholders (stock price appreciation plus dividends) to calculate Mr Sorrell's remuneration. In addition, earnings per share must be equal to inflation plus 1 per cent.

The changes come in response to criticisms from institutional shareholders, and are the result of three days of meetings this week between WPP executives and institutions.

Under the compromise deal, Mr Sorrell will no longer be eligible for performance units granted this year under a pre-existing incentive plan and will give up his phantom options from 1995. In their place, he will receive additional performance units, linked directly to the company's share price.

However, unlike the old plan, Mr Sorrell will receive no incentive payments until and unless the share price rises to at least 230p within five years, a change reflecting concerns among shareholders that his downside risk had been minimal under the original proposal.

Legal & General, which owns 1.5 per cent of WPP, said yesterday concessions from the company and Mr Sorrell were not enough and it still intended to vote against the package.

But WPP said it was confident a large majority of investors would vote in favour, and had made arrangements for those who had voted by proxy to revise their ballots if necessary.

Shareholders will vote on the original package, along with a new amendment containing the changes, when they meet on Monday. Lawyers for the company have advised that no prior notification of the changes is required, as the new package is worth less than the original.

WPP executives said privately that bad publicity surrounding executive pay in Britain had made it difficult for them to put their case plainly to shareholders. They continued to argue that his pay was comparable to remuneration received by executives of other leading international advertising companies.

Some shareholders planning to vote in favour of the scheme expressed concern that Mr Sorrell might leave in the event that the package was not approved.

The departure of Maurice Saatchi from his agency last year, following a row over pay, and his decision to establish a rival company, created acute problems for Saatchi & Saatchi, now Cordiant.