WPP Group shareholders today are expected to approve a compromise on Chief Executive Martin Sorrell's generous but controversial pay deal. But unlike the infamous Dec. 19 Saatchi & Saatchi Co. board meeting that resulted in Chairman Maurice Saatchi's departure, Mr. Sorrell's job seems secure at this point.
Rebellious WPP shareholders, led by Fleming Investment Management, were unhappy with the original plan that would have required Mr. Sorrell to invest $3.5 million of his own money in WPP stock, earning him up to $22.4 million should shares hit $4.86 each. (Shares are now trading at $1.95.)
With basic salary, share options, pension contributions and bonus plans added, Mr. Sorrell could collect $40 million to $56 million over five years if certain targets are met.
But after an announcement late on June 22 of WPP's second compromise, Fleming director John Emly said, "There have been significant changes made that have gone a long way to overcoming our earlier objections. We ........ are now likely to vote in favor."
The latest compromise states that the minimum Mr. Sorrell can make over five years, without hitting any performance targets, is $7.95 million. If all targets are hit, he could make a maximum of $42.9 million.
The target $4.86 share price, also part of the new compromise, would value WPP's market capitalization at $3.5 billion compared with the current $1.4 billion.
WPP, owner of J. Walter Thompson Co. and Ogilvy & Mather Worldwide, is the world's No. 1 agency holding company, with nearly $2.8 billion in '94 worldwide gross income.
The original plan drew the wrath of Fleming, Hermes and Standard Life, institutional investors with a combined 10.5% of total shares.
The objections appeared to be confined to U.K. shareholders.
Boston-based FMR Corp.'s Fidelity companies, WPP's biggest U.S. shareholder, will support the original proposal, said Brian J. Brooks, group director of human resources for WPP. The Fidelity group, which said "no comment," owes 8.76% of the stock.
The irony is that WPP wasn't legally obliged to invite shareholders to vote on Mr. Sorrell's pay. The gesture was designed to demonstrate that the company functioned in a democratic environment.
The revolt is "an indication of shareholder activism in the wake of Saatchi & Saatchi," said James D. Dougherty, senior VP-research, Dean Witter Reynolds, New York. The difference is "WPP is on the mend." "Things are going in the right direction....... With Saatchi & Saatchi, it clearly was on the rocks and going in the wrong direction."
Ironically, Mr. Sorrell worked for Saatchi for eight years. He departed as group financial director in 1985 before buying what was then Wire & Plastics Products, a manufacturer of wire shopping baskets, and turning it into a holding company giant.
Barry B. Burr of Pensions & Investments contributed to this story.