Eliminates Controversial Basis for Meeting Targets

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NEW YORK (AdAge.com) -- Faced with a possible shareholder revolt, WPP Group will try to tweak its compensation plan that would grant stock incentives to 19 executives and up to $80 million to its chief executive, Martin Sorrell.

'Relevance factor'
The compensation package, known as the Leadership Equity Acquisition Plan, would give executives up to five shares of WPP stock for each share they own if the company meets certain targets against 14 other companies. WPP's adjustments have been to eliminate a so-called relevance factor that adjusted the rival companies' results before comparison. Shareholder groups had argued the relevance factor made it easier for WPP to beat the performance targets.

LEAP is composed of a series of staggered five-year plans, covering 2004 through 2013, with a top match of four to one in the first year. LEAP replaces a single five-year plan established in 1999 that expires Sept. 2.

$18 million cap
According to the plan, Mr. Sorrell's participation is capped at $18 million in WPP stock, but he would receive $80 million if WPP were to meet all its targets -- an unlikely event as only 60% of the target was reached in the last five-year plan, which covered the boom years of 1999 and 2000. Given the staggered five-year plan structure, his payout would be just under $9 million annually over the next nine years.

The proposal had run into opposition from the Association of British Insurers, the National Association of Pension Funds and the Pension Investment Research Consultants, an advisory services firm handling proxies for U.K. institutions.

NAPF had given members a "qualified recommendation" to vote for the plan, given that executives would have to make significant contributions and their payoff would be tied to their long-term performance, said NAPF's director of communications, Andy Fleming. An executive close to WPP noted that financial commitment is not typical of most incentive plans.

In Mr. Sorrell's case, of the $18 million his participation in the plan is capped at, he would commit $10 million in 2004, at the four shares to one match, then another $8 million over the next four years at five-to-one.

WPP shareholders were scheduled to vote on the plan April 7 in London; the meeting has been postponed until April 16 to give shareholders time to consider the revised proposal.

As the U.K. economy continues to slog out of the recession, shareholders have become more active in recent years, particularly when it comes to high-flying executive compensation packages. Last year, shareholders at U.K. pharmaceutical giant GlaxoSmithkline defeated a CEO pay package that the NAPF and ABI had opposed.

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