Hi °C | Lo °C Advertising and marketing giant WPP will rely on its US shareholders to push through a controversial multi-million bonus scheme for its chief executive, it was reported today
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The group is said to be confident the scheme will be approved at its annual general meeting on June 2, despite opposition from UK shareholder groups, according to the Daily Telegraph newspaper.
The incentive scheme rewards senior managers who invest in the company's shares with up to five times as many free shares, as long as the firm hits certain key performance targets, including outperforming its rivals.
The group's founder and chief executive, Sir Martin Sorrell, can invest up to 19 million US dollars (£11.9 million) in the company's shares during the coming five years, potentially earning free shares worth 95 million US dollars (£59.7 million) during the period, based on the current share price.
The scheme has been strongly opposed by both the Association of British Insurers, which has issued a "red top" warning on the issue, effectively recommending that members oppose the scheme, and the Pension Investment Research Consultants.
But despite growing opposition to the bonus, WPP is understood to be confident it will be approved thanks to the support of RRev, which advises a number of large US investors.
US shareholders collectively hold a 38% stake in the group, with other overseas investors having a 32% stake.
Opposition to the WPP scheme is the latest example of a growing movement of shareholder activism, with a number of other remuneration reports voted down in recent weeks, including those of Shell and Royal Bank of Scotland.
WPP defended the new scheme, pointing out that it was the third incarnation of an incentive scheme that stretched back a decade, adding that it ensured that long-term awards for management were wholly aligned with shareholders' interests.
A WPP spokesman said: "Unlike most other schemes, WPP executives have to make an investment and take a financial risk, just like any other shareholder.
"If the management ever achieves the headline five-times equity match, shareholders will have seen their investment outperform the peer group every year for 10 years."
WPP is the world's second biggest advertising firm and owns famous names such as Ogilvy & Mather and J Walter Thompson. Last October it completed the takeover of market research firm TNS in a deal worth £1.6 billion.
In March it reported a 3.8% rise in annual profits, but warned that like-for-like revenues were likely to fall 2% this year, due to the "vicious recession across the globe".
