Under the plan, Mr. Sorrell and an anticipated 14 other senior executives at WPP and its operating companies will invest $20 million in WPP shares. If the company hits certain performance targets relative to 14 identified competitors, the executives will be rewarded with additional shares.
Depending on WPP's share price in 2004, the eventual payout for Mr. Sorrell could be $108 million when teamed with his current incentive plan.
Under the new plan, Mr. Sorrell would invest $10 million and could receive $50 million in shares in five years. In return, he has agreed to defer what is due him on September 4 in his 1995 incentive plan -- more than 6.4 million shares, now worth around $58 million.
In 2004, Mr. Sorrell can cash in that old plan's $58 million worth of shares plus the $50 million worth of shares under the new one.
Mr. Sorrell said the new executive incentive plan is entrepreneurial and performance-oriented, especially compared to his rivals' incentive plans.
"None of the others involves a plan where executives have to make an investment of cash," Mr. Sorrell said. "I'm also not aware of any having performance targets."
SHAREHOLDERS TO VOTE
WPP shareholders will vote on the new Leadership Equity Acquisition Plan at an extraordinary general meeting in London on Sept. 2. WPP last week mailed to shareholders the proposal, a copy of which was obtained by Advertising Age.
WPP's new plan appears to have stronger shareholder support than in 1995, when institutional investors forced the company to modify Mr. Sorrell's bonus package.
The Association of British Insurers also publicly voiced concerns.
This time around, ABI approves.
"It has been designed to meet the guidelines of the ABI and the National Association of Pension Funds, which require exceptional performance as a condition for exceptional rewards," said Richard Regan, head of investment affairs at the ABI. "It would be anticipated, therefore, that the [proposal] would be acceptable to institutional investors."
Mr. Sorrell said the reaction of the 20 institutional investors he has spoken to has been "neutral to positive."
That positive sentiment is aided by the 20% increase in pre-tax profits WPP announced last week -- to $182.4 million for the six months ended June 30. WPP also reported revenue of $1.65 billion, up 13% compared with the same period last year.
A WPP spokesman declined to identify the executives likely to participate in the plan, although he did name those at the holding company: Finance Director Paul Richardson, Human Resources Director Brian Brooks and Strategy Director Eric