Sorrell hits back at bonus rebels

ADVERTISING giant WPP is threatening to renew an existing bonus scheme if investors block controversial plans to introduce a new one that could net up to £112.5 million for directors.

Though the company, led by chief executive Sir Martin Sorrell, is confident that investors will back the new scheme at an extraordinary meeting this week, it is understood that the board could simply extend a 1999 share incentive plan called Leap (leadership equity acquisition plan) when it expires this year.

Extending the old Leap scheme would be highly provocative because it would not require fresh shareholder approval. But WPP is determined to put in place a new incentive scheme, which it feels is necessary to retain top executive talent.

Some investors argue that the size of the potential rewards are excessive and more appropriate for a private equity operation than a FTSE 100 company.

WPP has already been forced to amend the terms of the second Leap scheme following shareholder pressure. The company has also postponed its extraordinary meeting from last Wednesday to Friday this week to allow more time for talks with investors.

Under the new Leap plan, 19 directors will invest their own money in WPP shares, which are then matched by up to five times by the company, depending on how WPP performs against its rivals.

Sorrell himself could gain up to £44 million over ten years under the new scheme. He is already in line to scoop up to £27 million when the existing Leap arrangement matures this year. He has already put £5.5 million of his own money into the exisiting Leap plan.

This week's showdown is the latest clash between Sorrell and leading City institutions. Last year, he was forced to reduce his three-year contract to 12 months after 46% of investors refused to back WPP's pay policy.