Investor bodies lead revolt against Sorrell's 'golden parachute' clause

Advertising and marketing group WPP yesterday became the latest company heading for a showdown with shareholders over controversial "golden goodbye" clauses in Sir Martin Sorrell's contract.

The National Association of Pension Funds said a clause in his contract entitling him to £2.5m were the company to be taken over was "unwelcome". WPP is set for a rough ride at its annual shareholder meeting on 30 June for awarding Sir Martin a three-year contract, which flies in the face of City guidelines.

The NAPF is urging investors to abstain from approving Sir Martin's pay package. It is also seeking to block the re-election of two directors to the board.

The shareholder body said it found Sir Martin's contract "difficult to understand". It questioned why the WPP founder needed "the protection afforded by what is, in effect, a three-year rolling contract," adding: "[We are] unaware of any other FTSE 350 director with a similar arrangement."

The Association of British Insurers, which represents institutional investors, has also raised objections to Sir Martin's contract on the grounds that it opens the door to a potential "reward for failure".

Pirc, the shareholder activist group, has also joined the fray, recommending its clients vote against WPP's remuneration policy. It singled out the advertising group's proposal to extend the exercise period for Sir Martin's share option scheme as a particular area of concern. Unless phantom options covering the grant of nearly 2.15 million shares to Sir Martin in 1993 and 1994 are extended, they would be exercisable in December this year and March 2004. If all of Sir Martin's phantom options and other share schemes are taken into account, the group's chief executive could be in line for a record "golden parachute" of £45m in the event of a change of control.

Last year Sir Martin pocketed a salary of £839,000, benefits of £24,000 and a share award of £731,000.

Separately, the NAPF is also advising investors to abstain from re-electing a director at Brit Insurance. Whitbread faces a shareholder revolt today after the NAPF advised investors not to support the group's remuneration report because several of its executives enjoy two-year contracts.