According to sources within the company, pressures from institutional shareholders have sparked a series of meetings this week aimed at agreeing changes to the package, worth as much as pounds 31.6m to Mr Sorrell over five years, in order to secure broader shareholder support.
The proposed changes, which would affect performance-related pay, follow criticisms voiced by as many as six of WPP's leading institutional shareholders.
Publicly, WPP said it would not postpone the meeting nor make changes to the Capital Investment Plan (CIP), the incentive scheme being put to shareholders that could net Mr Sorrell as much as pounds 14.3m over five years.
Moreover, the company stressed that it believed Mr Sorrell's overall package was consistent with the Cadbury guidelines on executive remuneration and was similar to pay awards at comparable international advertising companies such as Omnicom and Inter-public Corporation, both based in the US.
All the same, the company is prepared to drop a pre-existing performance- related scheme and to add more onerous conditions to a phantom option plan in place since 1993.
Under the CIP proposal, Mr Sorrell is investing pounds 2.2m of his own resources in WPP shares, and stands to receive shares worth between pounds 2.3m and pounds 14.3m over five years, provided the stock hits pre-determined price targets. The highest of these, 304p, is only slightly higher than the stock price at the time Mr Sorrell joined WPP in 1986 and well below the 900p level achieved in mid-1987.
For the CIP incentives to kick in, the shares must also match or beat the average rise in the FTSE-100.
This is in addition to Mr Sorrell's salary of pounds 3.75m over five years, pension contributions of pounds 1.6m and a bonus worth a maximum of pounds 3.75m.
Mr Sorrell is also due to benefit from additional stock price-related incentives worth up to pounds 2.7m. It is these incentives that both WPP and Mr Sorrell appear prepared to drop in order to win approval for the potentially more lucrative CIP.
The additional incentives had drawn fire from institutional investors such as Hermes and Robert Fleming, who believed that there was too much overlap with the CIP.
WPP and Mr Sorrell are also willing to attach new conditions to the exercise of the pre-awarded phantom options, presently worth up to pounds 5.3m if WPP stock rises to 304p, the top of the incentive range.
For example, the options might be exercisable only if WPP shares rise by as much as the average increase in the FTSE-100 and the S&P 500. Additionally, total shareholder return rather than stock price might become the target measure.
Despite the apparent willingness to bend, WPP continued to defend the total remuneration package yesterday. Brian Brooks, WPP finance director, said: "What distinguishes the package from other executive remuneration packages in the UK marketplace is the requirement of a significant personal investment and the degree of risk that no payout will occur, which reflects the difficulty of reaching the performance targets."Reuse content