CLOSE-UP: LIVE ISSUE - REMUNERATION. Can the multinationals afford to sack their CEOs?

Bob Willott reports on how much it would cost to fire the ad industry's top execs.

The recent hoo-ha about how much Sir Martin Sorrell earns for running WPP Group pales in significance when compared with what he and his US contemporaries would receive were they to be removed from their current executive roles or, in some cases, if their companies were to be taken over.

According to a return filed by Grey Global Group, its chairman, president and chief executive , Ed Meyer, would receive about $26 million if despatched against his wishes. Small wonder then that there are no eager successors preparing to push their ageing boss out of a top-floor window.

But Meyer's dismissal package is dwarfed by what it would cost to evict Sorrell. Taking into account all the share and other incentive schemes in which he has participated over the years - and frequently deferred drawing his entitlement - it looks as if he could walk away with the best part of $50 million. Of this, under $3 million would be in the form of pay in lieu of notice. If Sorrell were to step under the proverbial bus, not only would it be very costly but also there is the interesting question of who might step into his shoes.

Omnicom's chief executive, John Wren, also stands to take a pile of money with him - mainly by exercising share options worth $38 million. But he doesn't have the added benefit of a long-term contract, as his employment may be terminated "at will". And it's not clear whether, if Wren were to be forced out tomorrow, he would have any claim to the maximum of $50,000 he would have collected if he stayed on and pushed up earnings per share by 120 per cent over the three years to December 2004. But the share option proceeds would be payable if Wren left of his own accord or not.

There is similar uncertainty about what, if anything, would be payable to Publicis Groupe's chief executive, Maurice Levy, if he was terminated unexpectedly. His contract runs to December 2003, but apart from compensating him for lost earnings and bonuses he would have received if he had worked to the end of his contract period, there seems to be no additional compensation entitlement. Levy is probably not losing much sleep over that, however, as he has a 2.3 per cent shareholding in the group.

John Dooner, the erstwhile chairman, president and chief executive officer of the Interpublic Group, who was recently demoted to run McCann-Erickson, would also gain little if forced out. With the company's share price so depressed, his options have relatively little value and - owing to the poor performance last year - Dooner and colleagues did not take, and therefore would not be able to cash in, any long-term incentive award to which they were entitled. All Dooner could expect would be 12 months' notice, or pay in lieu, unless he lost his job or was subject to constructive dismissal within two years of the company being taken over. In such circumstances, he would receive some $3.75 million plus accrued bonuses and any share entitlements.

The best outcome for Dooner would appear to be to sit tight, even if he were tempted to walk out. Under his employment contract, he stands to earn somewhere between $930,200 and $2.2 million a year for 15 years if he leaves the group's employment after his 55th birthday (he's 54 at present), plus a far more modest annual pension of about $62,000 from age 65. The transition back to McCann may also have been smoothed by the allocation of another bag full of share options and restricted share awards.

Leaving aside their exit packages, there seems to be a looney law to be deduced from the annual rewards of Wren, Dooner, Sorrell and Levy, namely: the poorer the company's performance, the better the pay packet.

Even allowing for the possibility that we have not unravelled the complex components of the reward packages absolutely correctly, the poorest performing group, Interpublic, paid its top man by far the biggest package if share and other incentives are included, while the best performer - Omnicom - paid the least.

Indeed, Omnicom's top brass waived their bonus entitlements to ensure "that lower-level employees receive substantial incentive compensation in recognition of their excellent performance in 2002, while at the same time permitting the company to achieve its financial objectives for shareholders".

This certainly helped to push profits and earnings per share ahead of the previous year. Judging by the amount of whingeing that emanated from UK parts of the Omnicom empire earlier this year, some of its staff feel that the shareholders did rather better out of the company than the middle managers. That could have a harmful impact on future performance and staff loyalty.

WHAT THEY EARN

OMNICOM

Chief executive: John Wren

Age: 50

Notice period: At will

Remuneration in 2002:

Basic salary: $875,000

Annual and long-term bonuses: Waived

Other remuneration/pension: $5,944

Long-term performance awards:

Award: Depends on earnings per

share growth over three years

Target: Average annual eps

= 120 per cent of 2001 eps

Period: Three years to 2004

Maximum award: $50,000

Share options/restricted stock:

Share options awarded in year: Nil

Restricted stock awarded in year: -

Share options granted to date: 4,433,800

Value of unexercised options $38,017,017

"in the money" (ie, exercisable):

Value of options (including Nil

those on phantom shares)

not yet exercisable:

Performance criteria (if any): Apparently not performance

related other than in relation

to share price

Post-employment compensation:

Amount payable excluding pension: 50 per cent of final salary

for eight years

Highest-paid executive in 2002:

Name: Allen Rosenshine

Role: Chairman and chief executive,

BBDO

Total package (salary, bonus, $996,156

pension and stock option awards):

INTERPUBLIC

Chief executive: John Dooner

Age: 54

Notice period: 12 months

Remuneration in 2002:

Basic salary: $1,250,000

Annual and long-term bonuses: $2,480,000

Other remuneration/pension: $80,046

Long-term performance awards:

Award: Cancelled

None in the year

Target: Cancelled

Period: Cancelled

Maximum award: Cancelled

Share options/restricted stock:

Share options awarded in year: 375,000 (valued at dollars

4,087,250)

Restricted stock awarded in year: $2,947,500

Share options granted to date: 1,658,240

Value of unexercised options $560,577

"in the money" (ie, exercisable):

Value of options (including Present value of future gain

those on phantom shares) estimated at $7 million

not yet exercisable: (shares' market value at

31 December 2002: dollars

1,316,434)

Performance criteria (if any): Apparently not performance

related other than in relation

to share price

Post-employment compensation:

Amount payable excluding pension: Between $0.9m and

$2.2m pa for 15 years

Highest-paid executive in 2002:

Name: John Dooner

Role: Group chairman president

and chief executive

Total package (salary, bonus, $10,844,796

pension and stock option awards):

WPP

Chief executive: Sir Martin Sorrell

Age: 56

Notice period: Rolling two to three years

Remuneration in 2002:

Basic salary: $1,261,000

Annual and long-term bonuses: Waived in favour of

restricted shares (see below)

Other remuneration/pension: $541,000

Long-term performance awards:

Award: 115,319

"Performance shares"

Target: Match/beat median

total shareholder return of

comparator group

Period: 3 years

Maximum award: n/a

Share options/restricted stock:

Share options awarded in year: Nil

Restricted stock awarded in year: $1,096,500

Share options granted to date: 2,148,581

Value of unexercised options $10,674,979

"in the money" (ie, exercisable): phantom shares

Value of options (including $3,341,910 plus dollars

those on phantom shares) 34,324,481

not yet exercisable: (est) from previous plans,

plus matching shares under

the LEAP scheme of up

to max of about dollars

40 million

Performance criteria (if any): Criteria for LEAP is to match

or beat media total shareholder

return of comparator companies

Post-employment compensation:

Amount payable excluding pension: None beyond normal

pension plan

Highest-paid executive in 2002:

Name: Sir Martin Sorrell

Role: Group chief executive

Total package (salary, bonus, $2,898,600

pension and stock option awards):

PUBLICIS

Chief executive: Maurice Levy

Age: 61

Notice period: Contract expires 31 Dec 2003

Remuneration in 2002:

Basic salary: $453,600

Annual and long-term bonuses: $1,242,598

Other remuneration/pension: Nil

Long-term performance awards:

Award: No details provided

Target: No details provided

Period: No details provided

Maximum award: No details provided

Share options/restricted stock:

Share options awarded in year: 220,000

Restricted stock awarded in year: Nil

Share options granted to date: Not known

Value of unexercised options Not known

"in the money" (ie, exercisable):

Value of options (including Not known

those on phantom shares)

not yet exercisable:

Performance criteria (if any): Apparently not performance

related other than in relation

to share price

Post-employment compensation:

Amount payable excluding pension: None

Highest-paid executive in 2002:

Name: Maurice Levy

Role: Chairman and chief executive

Total package (salary, bonus, $1,696,158 plus share

pension and stock option awards): options