Compensation Committee report on behalf of the Board

Dear share owner

T he work of the Compensation Committee in 2008 took place against a background of increasingly challenging business conditions in the economy as a whole and for the marketing services industry. In this environment, the committee maintained its focus on ensuring that the Company’s compensation policies at all levels were aligned to share owner interests, were fair to the Company’s employees, and enabled the Company (in a continuing competitive market for talent) to retain, incentivise, and recruit the talented people who are vital to the Company’s success.

2008 highlights

The committee’s work during 2008 included:

  • a review of the total compensation packages of the Group’s most senior executives relative to marketplace benchmarks to ensure competitiveness;
  • a review of the total compensation packages of both Paul Richardson and Mark Read;
  • a full review of the effectiveness and operation of all of WPP’s share incentive plans;
  • the approval of all incentives (including the Renewed Leadership Equity Acquisition Plan (LEAP)), payable in cash and in shares, for senior executives throughout the Group and setting appropriate targets for the Group chief executive and other executive directors;
  • consideration of the design details for LEAP III – the incentive plan that, with share owner approval, would replace Renewed LEAP following its expiry in 2009; and
  • a review of the fees for the chairman (in his absence), for the chief executive (in his absence), and a recommendation to the Board as to the fees for the non-executive directors.

What changed in 2008?

Details of all elements of compensation and any changes made to them are found in the following pages. To summarise, the key decisions and changes to compensation during the year were as follows:

  • the first awards under Renewed LEAP vested in March 2008. The committee exercised its discretion under the fairness review to reduce the size of the payout;
  • proposals for LEAP III, commencing in 2009 are being developed and will be put to share owners, probably at the AGM;
  • following the reorganisation in November 2008, the executive directors became entitled to a fee for their services as directors of the Company (the Group’s new holding company). The aggregate of each executive director’s base salary and directorship fees became the same as that director’s base salary alone before reorganisation;
  • the base salary of Sir Martin Sorrell, Group chief executive, and the fees of Philip Lader, chairman, were scheduled for a normal bi-annual review in 2008. Before a formal review was taken, each of them separately advised the committee that he did not think it appropriate to be considered for an increase in view of the current business conditions. The committee agreed with their request despite being minded to consider an increase for each of them;
  • the committee’s policy is to review non-executive director fees bi-annually. Following its scheduled review and in light of current business conditions, the committee recommended to the board that the fees for non-executive directors not be increased other than for a small increase to the fee for the Audit Committee chairman;
  • an increase to the base salary and fees for Paul Richardson from £500,000 to £550,000 was approved, effective 1 July 2008;
  • as Mr Richardson is now based in the US, his base salary has been converted into US dollars. To avoid currency fluctuations, effective 1 January 2009, his base salary will be $830,000; he also receives fees of £100,000 in respect of his directorship of WPP plc; and
  • Mark Read’s base salary and director's fees were reviewed and have been increased from £275,000 to £325,000 with effect from 1 January 2009.

As always, the time and support given by my fellow committee members, Philip Lader and Esther Dyson, and the ongoing advice and counsel of Bud Morten, the former chairman of the committee, are greatly appreciated. The committee's thanks also go to Marie Capes (the Company Secretary), Mark Linaugh (the chief talent officer) and Adrian Jackson (the director of compensation and benefits).

Jeffrey Rosen
Chairman of the Compensation Committee
April 2009