- Noreen O'Leary

DUBLIN, IRELAND WPP Group shareholders approved the third round of the holding company's Leadership Equity Acquisition Plan (LEAP), under which CEO Martin Sorrell stands to earn around $96 million over five years, on an initial investment of $20 million, if WPP outperforms a group of nine companies in that period.

Nearly 80.4 percent of shareholders voted in favor of the bonus scheme, almost 17 percent voted against it and the remaining abstained from the vote.

Passage of the plan had been expected, even though critics like the high-profile Association of British Insurers warned against the LEAP plan in which 20 other WPP senior execs participate. This third phase of LEAP is more generous than the previous two. Five years ago, Sorrell stood to gain $72.5 million, in the previous LEAP, which was also voted in favor by about 80 percent of shareholders.

While Sorrell stands to enjoy a big payday if WPP shares outperform competitors in each of the five years, no LEAP match will be paid if WPP performs below the median 50th percentile.

If the current scheme is potentially more lucrative, it is also more demanding, WPP contends. The previous LEAP scheme, five years ago, paid out the maximum at 75th percentile. This one has a sliding scale, up to the top match of 5 times, should WPP achieve performance at the 90th percentile. To achieve that, WPP would have to outperform each of the nine peer group companies for each of the next ten years. The current LEAP is also a weighted scheme so WPP has to outperform the industry's largest players like Omnicom and Publicis if the WPP LEAP participants are going to receive a reasonable match. If Omnicom beats WPP, the WPP execs will be way down the weighted performance league and therefore receiving a very small match or none at all.

WPP, which traditionally hosts its annual general meeting at Claridge's in London, moved it to the Four Seasons in Dublin this year, following its headquarters move to the Republic of Ireland. WPP chairman Philip Lader presented an update on results for the first four months of the year, saying like-for-like revenue dropped 6.7 percent as business worsened in April. (In the first quarter, WPP said like-for-like revenue declined 5.8 percent.)

At the annual meeting, WPP reiterated that given its revised forecasts showing revenue, on a like-for-like basis, is "likely to decline in the mid-single digits" in 2009, the company continues to reduce headcount in line with the forecasted revenue decline. In the first four months of this year, the number of staff at WPP Group companies dropped by almost 4,300, or 3.7 percent, compared to the end of December 2008. Over half of the people who left did so on a voluntary basis, the company said.

WPP also told shareholders that for the remainder of the year the short-term focus would continue to be balancing staffing costs against the fall in company revenue. In the medium and longer term, WPP said its strategy remains focused on six objectives: increasing operating profit by 10-15 percent annually; raising margins by half to one margin point annually; reducing staff cost-to-revenue ratios by up to 0.6 margin points annually; growing revenue faster than industry averages; and continuing to improve "our creative reputation and stimulating co-operation among group companies."

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