Investors balk at Sorrell pay deal

MATHEW HORSMAN

Institutional opposition appeared to be building yesterday to the pounds 35m- plus package forMartin Sorrell, chief executive of advertising company WPP.

Some investors have begun to call privately for a compromise, which would lower the total amount Mr Sorrell receives if WPP's stock price rises to as high as 304p. Shareholders will vote on the issue at an extraordinary meeting on 26 June.

"We have nothing against the idea of incentivising Mr Sorrell," said one investor, "but the amounts are just too high."

Two institutions, speaking for 9 per cent of the shares, have already indicated they would vote against the proposal. They are Hermes, the pension fund of the Post Office, and Robert Fleming. Other institutions were said to be taking a closer look at the company's figures, particularly previously awarded phantom shares that could be worth pounds 11m in the event that the shares rise to 304p by 1999.

The Association of British Insurers also raised doubts over the weekend about size and terms of the incentives, specifically criticising the lack of financial-performance targets. An ABI executive said yesterday that in cases where incentives are "perceived to be large, it is fundamental that there be a measure of financial performance in addition to stock market performance".

Sources close to Mr Sorrell said yesterday the ABI reservations were incongruous, given that the association had written formally last month to WPP's consultants, New Bridge Street, suggesting the proposal was in keeping with the main thrust of the Cadbury recommendations on performance- related pay.

The ABI denied yesterday that it had changed its views, despite having written in their letter that "the incentives contained in the present WPP proposals appear to reflect in fair measure" recommendations of an ABI report issued last year on long-term remuneration for executives.

WPP sources reiterated yesterday that pounds 35m was an inflated figure, but stressed that, in any event, the company's shares would have to rise by a compound annual rate of 22.5 per cent for the maximum number of incentive shares to be awarded. In that event, shareholders would see their own investments rise significantly in value.

In addition, shareholders would not see their holdings diluted, as the shares to be awarded to Mr Sorrell have already been purchased and will be held by the company until, if ever, the targets are met.

As part of the package, which replaces a former five-year contract, Mr Sorrell will have a three-year deal, dated from 1 September 1994, to be renewed annually thereafter. He can cash in no performance shares before 1999.

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