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Maurice Lévy’s “salary sacrifice” is not quite as self-sacrificing as it appears

For Maurice Lévy and Sir Martin Sorrell – a pair who love to loathe  each other – politics is clearly a continuation of war by other means.

By now we’re all familiar with the WPP chief executive’s increasingly assured role as a political and economic soothsayer. He’s forever popping up on the Today programme as a commentator; he recently made his debut on Any Questions (which proved a surprisingly bruising experience for its quizmaster, Jonathan (or is that “David”?) Dimbleby); and he’s even opened up to us on Desert Island Discs. If you want an authoritative opinion on David Cameron’s Euro veto, ask Sir Martin. The national newspapers certainly did – his scathing denunciation of our isolationism has been plastered all over their front pages.

Less familiar by far, at least on these shores, is the accomplished political role played by the head of Publicis Groupe in his native France. Perhaps because he is nearing 70 – and therefore inevitable retirement despite the recent extension of his term of office as PG pdg – Lévy has become an increasingly outspoken, if measured, critic of French president Nicolas Sarkozy’s handling of the economy.

It’s important to note that Lévy and his company are regarded by the French business and political class with a reverence out of all proportion to that enjoyed by WPP in the UK. WPP is no slouch, but Sir Martin can only dream of headlines such as the following: “Maurice Lévy est le patron le plus “performant” du CAC 40” – substituting, of course, the FTSE 100 for France’s principal financial index.

Lévy has used this enviable reputational platform to morph himself into the key spokesman of French private enterprise – as chairman of Afep (Association Françaises des Entreprises Privées), a sort of French CBI.

Last August, in transparent imitation of the Sage of Omaha (aka Warren Buffett), he and a number of leading French businessmen signed an open letter in Le Nouvel Observateur pledging to plug the gaping holes in their country’s budget by means of a Robin Hood tax levied on France’s richest – such as themselves.

Entirely consistent with this initiative, Lévy proudly announced at the beginning of this month that he would waive his annual PG salary (€900,000) in favour of a performance-based bonus.

In these straitened times what could be fairer, more laudable, or altruistic than that?

Well, let’s put it this way: Lévy will not exactly be losing out as a result of this apparently noble gesture. In the first place, as he himself admitted, he will be receiving a generous “deferred compensation package” (ie pension) when he retires next year (as he assures us he will, though I still have my doubts if Arthur Sadoun fails to cut the mustard). The calculus for this severance package is somewhat delphic, but it is increasingly certain to be worth around €35m when he cashes it in (for more on this issue, see my earlier post). And that’s not to mention a personal fortune estimated at €164m by the French media.

Nothing wrong with that you may say, while inwardly noting the laxity of French corporate governance. After all, Lévy is a man who has deserved well of his company: he has, during his long career there, propelled Publicis from French hot shop to the world’s third largest marketing services group, making a lot of other people rich along the way.

But let’s move on. Have I mentioned the 2009 so-called Lion Lead long-term staff incentive scheme? I have not. It’s so complicated that virtually no one fully understands it. But the bottom line is that it vests in March 2012 and Lévy liked it so much he invested in it himself. I’m told the pay-off, providing all the complicated provisos are satisfied, is about 20 times the original investment.

Then there is the annual bonus itself to consider. Most of Lévy’s conventional package is, as it happens, already performance-related, allowing him to earn about €3m a year gross. The “double digit” (ie several million euros) bonus conditionally granted him by PG’s supervisory board this year will not, I speculate, actually leave him out of pocket. Given PG’s stonking organic growth recently, he may even end up ahead of his normal game. Yes, I know Lévy was studiedly downbeat about the global economy in his message to staff yesterday. And that his subsidiary Zenith Optimedia has pared back its 2012 global ad forecast of 5.3% growth. But the downgraded figure of 4.7% is not exactly zero growth territory.

One last thought before leaving this dusty financial subject. There’s a Sorrell angle here as well. Lévy may feel that by making a “salary sacrifice” he is getting one over on his long time foe into the bargain (never underestimate the driving force of enmity). Chief executives (and Sorrell is no exception here), are forever justifying their increasingly handsome remuneration packages by pointing to the competition abroad. But what if the competition abroad is actually taking a high profile pay-cut? What will WPP shareholders have to say then?

We’ll find out when the next pay round arrives, and Sir Martin asks for a raise on his existing £4.5m (€5.4m) annual package.

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