Remuneration report

Elements of remuneration /

Details on remuneration for each of the Executive Directors are included within this section with some commentary on the three principal remuneration elements described below.

Base salary and benefits

Base salary and benefits are reviewed annually with reference to relevant market practice, the Company’s financial performance and the individual’s skill, experience and performance in order to provide a market competitive reward.

In relation to 2011, it has been decided that the annual review cycle for all employee salaries and benefits will change from January to July. Executive Directors will be included in this different timescale. It is intended that salary changes for Executive Directors and senior management will be determined with respect to the general salary considerations of the whole Group and be informed by market changes.

A summary of the benefits payable to executive directors in 2010 is given within this section. These mainly comprise company car benefits and medical insurance.

Short term annual cash bonus incentives

All executive directors are provided with an annual cash bonus opportunity to incentivise and reward performance against financial growth targets. Their bonus opportunities have a maximum of 100% of annual salary.

The design of the arrangements in 2010 maintained and enhanced the significant revisions implemented in 2009 to ensure that an equitable balance of management and shareholders’ interests was consistently achieved in differing economic conditions. Performance targets were determined on an individual basis to relate to stretch levels of Operating Profit growth.

Long-term share-based incentives

The Committee keeps the Company’s long term incentive plan under regular review to ensure it remains appropriate in fulfilling its objectives and that the performance conditions continue to represent the best way to drive the creation of shareholder value.

In 2010 the Company continued to use the 2003 Performance Share Plan (PSP) with unchanged performance conditions. The PSP is designed to comply with the requirements of institutional guidelines and corporate governance best practice, as well as to reflect the Committee’s remuneration policy. In any financial year, an executive is eligible to receive a conditional award of shares with a face value of no more than two times basic salary in normal circumstances. The Remuneration Committee has the discretion to approve an award of three times salary in special circumstances. In light of his promotion to CEO Aegis Group plc in 2010, the Remuneration Committee approved an award of three times annual salary to Jerry Buhlmann.

The performance conditions that apply to the 2010 PSP awards are determined partly by reference to the Company’s Total Shareholder Return (“TSR”) performance relative to a group of similar businesses and partly by reference to the Company’s underlying EPS growth relative to RPI.

The TSR targets were as follows:–

TSR performance relative to peer group Proportion of award vesting
Median or below Nil
1st or 2nd 50%
For intermediate performance Nil to 50%
  (pro rata on a straight-line basis)

The following companies were included in the peer group for calculation of TSR performance in 2010:–

Dentsu Inc. Omnicom Group Inc.
Havas SA Pearson plc
The Interpublic Group
of Companies Inc.		 Publicis Groupe S.A.
Ipsos S.A. Reed Elsevier plc
The News Corporation Limited Viacom Inc.
GfK WPP Group plc

The EPS performance conditions were as follows:–

Average annual EPS growth in excess of RPI Proportion of award vesting
3% or less Nil
3% to 15% Nil to 50% (pro rata on a straight-line basis)
15% 50%

Further to the appointments of the Chief Financial Officer in September 2009, the Synovate CEO in March 2010, and the Chief Executive Officer of Aegis Group plc in May 2010 the Company has continued to develop and strengthen its senior management and focus on the retention of high calibre talent. This has led the Committee to review the Group’s long term incentive arrangements for 2011 and in particular the continued appropriateness of the performance conditions.

The review concluded that the TSR peer group and vesting schedule should remain unchanged in 2011 and that an amendment to the EPS performance conditions should be adopted. As from 2011, the EPS element of the performance conditions will be based on a straightforward average annual EPS growth target of 3 to 15% over three years. This amendment takes account of the overwhelmingly international nature of the Group’s business, as well as market conditions and consensus forecasts for the Group, and the Committee believes that EPS performance conditions remain robust and demanding. The adjustment was the subject of prior consultation with shareholders holding over 50% of our shares, who were supportive of the proposal.

The PSP performance conditions are tested on the third anniversary of grant of the award. There is no provision for retesting. To the extent that the performance conditions are not satisfied, the awards lapse.

The Committee believes that using both EPS growth and TSR for awards under the PSP provides a balanced incentive between assessing the Company’s relative returns to shareholders and its underlying financial performance. The blend also provides a balanced long-term incentive for the Company’s executives.

No awards will be made under previously closed schemes, although awards granted in the past will continue to be exercisable in accordance with the rules of each respective scheme. The closed schemes are the 1995 Executive Share Option Scheme and the 2003 Executive Share Option Scheme. Details of these schemes are given within this section. Details of all share incentive awards outstanding for each executive director serving during 2010 are set out within this section.

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