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Principles of remuneration

Performance

Notes

i) Fixed compensation comprises salary, pension contributions and other benefits as disclosed in the Directors' remuneration table.
ii) Variable compensation comprises short-term incentive plans and the value of Executive Share Awards which are disclosed in the Directors' remuneration table along with the expected value of the Renewed LEAP award granted in 2007 referred to in the Renewed Leadership Equity Aquistion Plan table.

Alignment to share owner interests

Notes

i) Cash compensation comprises salary, pension contributions, short-term incentive plans and other benefits as disclosed in the Directors' remuneration table.
ii) Share-based compensation comprises the value of Executive Share Awards which are disclosed in the Directors' remuneration table along with the expected value of the Renewed LEAP awards granted in 2007 referred to in the Renewed Leadership Equity Aquistion Plan table.

WPP Share Incentive Scheme Dilution for 2003 to 2007

All executive compensation at WPP is governed by three guiding principles:

  • competitiveness;
  • performance; and
  • alignment to share owner interests.

Competitiveness

Compensation packages for Group executives are reviewed on a regular basis (on average every 24 months). When reviewing an executive's package the committee usually consults with the Group chief executive and the Group chief talent officer.

In making its assessments, the committee considers individual and business unit performance, level of experience and scope of responsibility. It also takes into account the overall package, including both fixed and variable elements, and considers both the 'on target' and maximum levels of remuneration. The competitiveness of this total package is then reviewed in relation to the most appropriate benchmarks.

For example, for the Group chief executive three separate benchmarks for remuneration opportunities are used:

  • the most senior executive position in the Company's closest industry comparators;
  • the CEO position in companies of comparable size and complexity in the UK; and
  • the CEO position in public companies of comparable size and complexity in the US.

A similar approach is taken for the other senior executives, including executive directors. The Compensation Committee considers data from the latest industry surveys covering the senior positions in WPP's operating companies. WPP participates in the leading global surveys of executive remuneration in the advertising, market research, healthcare, interactive, direct marketing, public relations and public affairs sectors. In addition, for heads of operating companies the committee considers public disclosures for similar positions in listed companies of comparable size and complexity in the relevant sector.

Performance

All remuneration packages for senior executives, including executive directors, have a significant element which is variable and dependent on performance as can be seen from the chart below.

Alignment to share owner interests

WPP is committed to aligning executive performance and reward with share owner interests. This is achieved by providing significant opportunities for executives to acquire WPP shares, by using performance measures that are linked to the creation of share owner value and by operating share ownership goals for the most senior executives.

Many of our incentive plans pay out wholly or partially in WPP shares. As can be seen below, at least half of the compensation package of the executive directors was delivered in shares during 2007.

Total Shareholder Return (TSR) relative to a group of key comparators is the measure for determining long-term performance-based rewards for Group executive directors.

WPP has encouraged share ownership for its most senior executives, including executive directors, for many years. For executive directors this is achieved through participation in Renewed LEAP. Other WPP Leaders (approximately 200 people) are incentivised to own 40,000 WPP ordinary shares each.

The committee also considers the extent of any dilution of share owner value through the issue of new shares to satisfy incentive awards. The dilution, as at 24 April 2008, was well below the 10% level acceptable to the ABI. It is intended that Renewed LEAP awards, the Performance Share Awards, the Executive Share Awards and Restricted Stock Plan awards will all be satisfied with purchased shares held either in the employee share ownership plans (ESOPs) or in Treasury.