NEW YORK Interpublic Group shareholders want the company to separate the roles of CEO and chairman, responsibilities that are currently combined under Michael Roth. Those investors are also asking that the company review bonuses to senior executives, based on performance targets, and recoup them should another restatement occur.
The proposals are contained in IPG's proxy statement, filed April 27. Such investor recommendations, put forth at annual meetings, often reflect the singular interests of corporate gadflies. But it's clear this year IPG may face more than a few angry shareholders at its May 25 annual meeting.
According to one investor proposal: "It is well to remember that at Enron, WorldCom, Tyco, and other legends of mismanagement and/or corruption, the chairman also served as CEO. When a chairman runs a company as chairman and CEO, the information given to directors may or may not be accurate. If a CEO wants to cover up improprieties or mismanagement and directors disagree, with whom do they lodge complaints? The chairman?"
IPG, which recommended shareholders vote against the proposal, responded in the proxy: "The board believes strongly that it should have the discretion of deciding if and when Interpublic is best served by a chairman who acts in a dual role as chief executive officer. The board, after careful consideration, determined that having Michael I. Roth in the combined role of board chair and chief executive officer ("CEO") provides Interpublic with the most efficient and effective leadership model. Consequently, on January 19, 2005, Interpublic amended Mr. Roth's employment agreement to provide that he serves as chairman and chief executive officer."
Because of those contractual terms, Roth would most likely not be affected by the proposal, if passed.
In its veto argument, IPG added that its six independent directors, among the company's eight board members, "provide vigorous oversight of our key issues relating to strategy, risk and integrity."
In the second proposal, also opposed by IPG, shareholders used Computer Associates as a model for its recommendation. That proposal was voted in at CA's 2004 annual meeting after the company announced in October 2003 that it had inflated fiscal 2000 revenues by reporting revenue from contracts before they had been signed.
According to the IPG shareholder proposal: "There is no excuse for over-compensation based on discredited earnings at any company. This proposal will give us as shareholders more options if we find ourselves in a situation similar to the Computer Associates scenario. If it appears that our company reported erroneous results that must be negatively restated, then our board should be enabled, by adoption of this proposal, to recoup executive pay that was not earned or deserved."
IPG responded: "Interpublic's executive compensation programs are designed to attract and retain highly qualified executives and to motivate executives to maximize stockholder returns. In contrast, the shareholder proposal adopts an overly rigid approach to this issue, one that would require the board to mechanistically recoup bonuses in inequitable circumstances and potentially violate Interpublic's existing contractual commitments."
An IPG representative could not be reached.