Let’s face it, no one ever went into advertising to remain poor: the extravagant severance payments awarded to top executives by compliant remuneration committees in London, Paris and New York are the stuff of legend. But, as RBS’ Fred the Shred discovered, being filthy rich isn’t much fun if you end up a pariah. The context of gain matters.
John Dooner, latterly chief executive of McCann Worldgroup, recently retired from Interpublic Group with a pension of $37.7m. This extraordinarily generous provision was bolstered by payments made during his years as IPG group ceo – a position from which he stepped down in 2003. Had he actually done a good job in either of these roles, no one would have batted an eyelid. As it is, the IPG years were mired in scandal and the normally reliable McCann has been haemorrhaging major accounts. By any standards, $37.7bn is a handsome reward for failure.
Unlike Dooner, Publicis Groupe chief executive Maurice Lévy deserves well of his company. He has made it a global force to be reckoned with, while Dooner has presided over decline. And he will duly be compensated – with a financial package worth, perhaps, £30m when he retires. Nevertheless, it is unfortunate that the calculation of this generous severance payment involves factoring in, at the full measure, a phantom bonus payment he never awarded himself last year; in the midst of recession, he had made great play of sacrificing this self-same bonus as a token of socialist “solidarity” with the many staff whom he had had to make redundant or, at least, whose salaries he had slashed.
However, that is no more than a faux pas compared with the predicament John Wren, group ceo of Omnicom, is in. Wren stands accused of profiteering from cheap stock options while, all around him, his agencies withered on the vine and staff were put out on the street to help make corporate ends meet. The accusation comes from a maddened activist shareholder – investment manager David Poppe, of Ruane Cunniff & Goldfarb’s Sequoia Fund, a 1% owner of Omnicom stock. Poppe has sent a circular to other shareholders which alleges that a massive grant of 22 million stock options on March 31 2009, plus another 3.5 million awarded on the last day of 2008, enabled Wren and his senior management team to acquire 8% of the company at bargain basement prices. And there’s more. Poppe reckons it’s part of a pattern of behaviour stretching back a decade. He just stops short of accusing Wren of backdating these options, in order to achieve a favourably low exercise price; which is actually illegal.
The thing about options, of course, is that they are a gamble which can end up being worthless. But Wren, a former accountant, is a wily operator. With the stock market rallying, what was virtually valueless in 2008 has turned into pure gold. The result being that his 2009 annual “compensation” shot up to $7.9m – compared with $2.9m the year before – according to SEC filings.
Wren should watch out. Fund manager activists have had surprising success in toppling the mighty. Remember David Herro, who was responsible for the nemesis of the Saatchi brothers back in the nineties?