The Wren report

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John Wren, president-CEO of Omnicom Group, lost more than $28.5 million in a sudden plunge of the agency's company stock in the past three weeks, erasing the value of the 2 million options he was granted in the past year.

Mr. Wren, who ranked as the second highest paid CEO in New York last year, has become ensnared in charges that he and other executives used aggressive accounting techniques to pump up the company's earnings and boost its stock price. Omnicom's heavy use of options in compensating its executives gave Mr. Wren and others at Omnicom a strong incentive to keep earnings high.

"These are very big grants," said Don Delves, who heads Chicago-based executive consulting firm Delves Group, which specializes in analyzing options grants. "Options grants have grown over the past decade at all companies, but Mr. Wren's package is still out on the fringe of what is considered large."

Most advertising executives watched their pay fall in the last year due to the weak advertising market. However, as he was granted 2 million options, the value of Mr. Wren's compensation package jumped to $97 million, up from $3 million a year ago. He trailed only Citigroup's Sanford Weill among New York's highest paid CEOs.

But it's not just Mr. Wren who's having wallet shock. The company's stock fall has left 70%, or 13.4 million of the company's 19.2 million options, worthless because their strike prices-what holders have to pay to convert them to shares-are above the stock price, according to Delves Group. In all, investors' concerns about Omnicom's accounting have cost the company's current and former employees over $400 million.

While omnicom delays the costs of its acquisitions, it takes the benefit upfront. Unlike its competitors, Omnicom includes any increases in the revenue and earnings it gets from its acquisitions immediately in its "organic growth" figure, a widely followed industry statistic. Its advertising rivals wait a year before doing the same.

"Its practices make current earnings look better," says Paul R. Brown, who is chairman of the accounting department at New York University's Stern School of Business. "Is it too aggressive to hold off the cost? That's the question."

Mr. Gandel is a senior reporter with Crain's New York Business.

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