Renewed Leadership Equity Acquisition Plan (Renewed LEAP)
2008 was the fifth year of operation for Renewed LEAP and awards were once again granted to the Group’s key executives.
Under Renewed LEAP, which was approved by share owners in 2004, participants have to commit and retain WPP shares (investment shares) in order to have the opportunity to earn additional WPP shares (matching shares). The number of matching shares that a participant can receive at the end of the investment and performance period depends on the Company’s TSR performance measured over five years (four years in the case of awards made in 2004).
Because relative TSR may not always reflect the true performance of the Company, the Compensation Committee is required to perform a ‘fairness review’ on the basis of which it may, in exceptional circumstances, decide to vary the number of matching shares that will vest. Factors the committee considers in its fairness review of any awards include, amongst others, various measures of the Group’s financial performance (such as growth in revenues and in earnings per share) and any evidence of distortions in the share price of either WPP or the peer group (such as bid price premia).
The first award cycle for the 2004 to 2007 performance period vested at the start of 2008. Details of the payout can be found in Other Long-Term Incentive Plan awards. However, it should be noted that (as was fully disclosed in last year’s Report & Accounts) although the result of the TSR calculation indicated a vesting level of 3.27 matching shares, after the operation of the fairness review there was a net reduction of 0.67 such that the final number of matching shares awarded was 2.60. These figures take into account the impact of both the bid premium contained in two of the comparator companies and the large currency swings over the performance period.
The second award cycle for the 2005 to 2009 performance period vests at the start of 2010.