WPP heading for victory on pay packages

WPP, one of the world's largest advertising agencies, is set to win a definitive victory in its shareholder vote tomorrow over the bumper pay packages it is trying to push through for senior directors.

The company's upbeat mood follows a charm offensive with institutional investors in the past week to persuade powerful shareholders that the new bonus arrangement, which could pay 19 directors £112.5m over five years, is not excessive.

A number of major fund managers which had been very critical of the arrangement are likely to abstain rather than oppose WPP at its meeting. The Association of British Insurers has also removed its "red top" warning to members to vote against the company, toning it down to an "amber" rating to signify the fact that WPP has made changes to its proposals.

Feted by the City as one of Britain's most successful international businesses, WPP found itself embroiled in a row with investors this year over its new long-term incentive plan, which could pay Sir Martin Sorrell, the chief executive and founder of WPP, £44m.

The ABI and other shareholder bodies objected to the sheer amounts involved, and also criticised the structure of the incentive plan, which they claimed made the payouts too easy to achieve.

To avoid a significant protest vote, WPP removed the weighting from the benchmark group of companies it is comparing itself with, following protests that WPP would in effect have to compare well with only two other major advertising companies - IPG and Omnicom.

WPP has also written to shareholders saying that in the event of a takeover of the company, Sir Martin might not get his £44m because share options granted as part of the remuneration scheme might not vest in full.

While some critics said the changes were just "tinkering", others involved in the negotiations declared themselves satisfied with the changes.

As a result of the negotiations, WPP is confident that there will not be a repeat of last year's clash with investors, which saw 46 per cent of shareholders vote down or abstain over WPP's remuneration package, which involved a three-year contract for Sir Martin.

Observers believe the vote on the plan, to be held at the Savoy in London, could be 75 per cent or more in support.

WPP is one of a number of companies over which the corporate governance lobby has backed down recently.

The National Association of Pension Funds is supporting the remuneration arrangements at Reuters, which last year hosted one of the stormiest annual meetings at which investors complained about the generous pay package of Tom Glocer, its chief executive, at a time when its business was suffering.

The NAPF is also supporting the remuneration arrangements of ITV, which could see its chief executive, Charles Allen, receive £21m. But Pirc, the pension fund consultant, is continuing to oppose both ITV and WPP.