Omnicom and IPG: A Continental Divide

Serene vs. stormy. Intimate vs. large-scale. Geography wasn’t the only difference between last week’s shareholder meetings for the holding cos.

It was a tale of two cities last Tuesday. Interpublic Group did some more explaining at its shareholder meeting in a posh Seventh Avenue skyscraper, while Omnicom Group did some more self-congratulating on the in-office basketball court at TBWA\Chiat\Day’s Southern California headquarters.

IPG’s meeting in New York drew about 170 to a well-appointed auditorium with stadium seating, a stage and a big screen. Most of the hour-long session was taken up by the holding company’s attempts to calm concerned shareholders, who wanted answers following more than a year of financial pratfalls. CEO David Bell spoke candidly about IPG’s stormy recent past in a 25-minute state-of-the-company speech.

The mood was far more serene, considerably less eventful and notably shorter at Omnicom’s meeting in Playa del Rey, Calif. A handful of shareholders—less than a dozen attended the meeting overall—waited patiently in the ultra-hip TBWA\C\D lobby, festooned with visitor badges that bore the former Chiat/Day’s skull-and-crossbones logo and sayings like “I’m not just a guest, I’m a groupie.” They were soon led to the basketball court by a hostess who proudly told one shareholder that every day was like going to work “in a playground.”

Cool, calm and collected, Omnicom’s board and top officers, led by chairman Bruce Crawford and president and CEO John Wren, felt hardly a ripple of shareholder concern, voting down a shareholder motion to withhold stock options for top management. And Wren spoke for barely five minutes, mostly about general business conditions, and even then it was happy talk compared to IPG’s “you’ve got questions, we’ve got answers” town-hall meeting.

“We’re in the 42nd month of the worst recession the industry has ever seen,” Wren said. But, he added with a smile, that means “we’re 42 months closer to recovery.”

Unlike Wren, who was not asked to take a single question, Bell, on the hot seat since inheriting the job in February, fielded six queries from the floor. Still, IPG’s new leader seemed polished and focused.

Shareholders wanted to know about former IPG CEO John Dooner’s retirement package ($930,200 to $2.18 million annually in benefits for 15 years). Bell said it was consistent with competitive practices in the industry, and announced he was going to “lead by example”: He and other top managers will give up 1.2 million share options, including 500,000 from Dooner alone. Chairman emeritus Phil Geier and FCB Group CEO Brendan Ryan are among those who also agreed to give back to the company. Furthermore, Bell said, “John Dooner and I agreed to escrow all options until the share price reached $20.” (It currently hovers at about $12 a share.)

As for compensation, he noted that there were no bonuses for senior management last year, and bonuses were “substantially and significantly reduced in 2001.” Still, in response to a shareholder question, Bell said Dooner, IPG CFO Sean Orr and Jim Heekin, former CEO of McCann-Erickson WorldGroup, will not be returning their bonuses from 2001.

Bell acknowledged the second straight year of disappointing earnings in 2002 and the lack of fiscal control toward the end of the year—a clear reference to McCann falling well short of its budgeted profit goal. And he called IPG’s much-publicized $181.3 million accounting imbalance in 2002 “a painful public act of Chinese water torture.”

Shareholders did give IPG authority to increase the number of common shares from 550 million to 800 million, which Bell said gives the company more options strategically.

At Omnicom’s meeting, CFO Randall Weisenburger stuck to the agenda, except for one moment when he noted that “2002 seems like ancient history,” and damage done to Omnicom’s stock last June was largely healed. He did not elaborate, but he was referring to a June 12 Wall Street Journal piece that questioned Omnicom’s financial dealings and sparked a slide that saw its stock tumble 62.5 percent to $36.50 in a two-week period, down from its 52-week high of $97.35 three months before. (Omnicom closed last Tuesday at $64.11.)

Wren reminded his audience that “unlike competitors,” the most financially successful of the big ad holding companies has consistently grown revenue and profits, including 10 percent growth in 2002. He also said New York-based Omnicom took this year’s shareholder show on the road to give stock owners outside of Gotham a chance to participate, although if the turnout was any indication, it did not have that effect.

On both coasts there was, as always, more mundane business to conduct. IPG’s 10 board members received new, one-year terms: Bell, Dooner (now WorldGroup CEO), Orr, presiding director Frank Borelli, Jill Considine, Reginald Brack, Richard Goldstein, John Greeniaus, Michael Roth and J. Phillip Samper. Meanwhile, Omnicom shareholders approved a declassification of the board of directors, replacing three classes of staggered three-year terms with a process in which all directors will stand for election at each shareholder meeting, beginning in 2004.

In California last week, six still-classified directors renewed their terms: Susan S. Denison, John R. Murphy, John R. Purcell, Linda Johnson Rice, Errol M. Cook and Michael A. Henning. Omnicom stockholders also approved an amendment to its equity incentive plan to retain key executives, in which the maximum number of shares that can be issued under the plan was increased by 3 million to 9.1 million.