Shareholder groups said they are only partly satisfied by a revised Leadership Equity Acquisition Plan, which would grant executives up to five shares of WPP stock for each share they own, if the company meets targets against 14 other companies. (AA, April 5) WPP eliminated a "relevance factor" that adjusted the rival companies' results before comparison, which shareholder groups argued made it easier to beat the performance targets.
The proposal had run into opposition from the Association of British Insurers, the U.K.'s National Association of Pension Funds and Pension Investment Research Consultants, an advisory-services firm handling proxies for U.K. institutions. Additionally, one shareholder, Legal & General Group, unsuccessfully requested that WPP hold a separate vote on the incentive for WPP Chief Executive Martin Sorrell, which could be worth as much as $80 million.
A WPP spokesman said Legal & General's proposal was turned down because the company wants to handle all its executive compensation together and saw no point in splitting the incentive plans. A Legal & General spokesman said the insurer, which has a stake of about 3.3% in WPP, will not bring up its request again at the shareholders' meeting.
Some of the shareholder groups have now softened their position, but others are still opposing the plan. The NAPF told members that, while there are still some concerns about the way the compensation is calculated, it would support the plan due to the time and financial commitment it requires from the executives participating. Separately, the ABI, which had issued a "Red Tap" warning to members highlighting "serious areas of concern," downgraded it to an "Amber Tap" after the revision. The new warning notes the group still has concerns, but those may have mitigating factors, said a spokeswoman.
Meanwhile, PIRC is still recommending its clients oppose the plan, said David Somerlinck, corporate-governance policy manager. The group's initial opposition was based on the LEAP's excessive levels, even beyond the performance adjustments, and that has not been addressed by the revision, he noted.
Observers anticipate the proposal will pass, especially since the ABI revised its alert, relieving some of the pressure on WPP.
As the U.K. economy continues to slog out of the recession, shareholders have become more active, particularly in protesting executive compensation. Last year, shareholders at U.K. pharma giant GlaxoSmithKline defeated a CEO pay package opposed by NAPF and ABI. WPP had a close call with activist shareholders last year, after Mr. Sorrell signed a three-year contract that saw his annual pay jump by 83%. U.K. corporate-governance watchdogs have since pushed for one-year contracts.