Executive Remuneration Policy table – executive directors

The following table sets out details of the on-going compensation elements for WPP’s executive directors.

Component and Purpose Operation Performance Maximum Annual Opportunity
Fixed elements of compensation
Base salary and fees
To maintain package competitiveness and reflect skills and experience.
Base salary and fee levels are reviewed every two years or following a significant change in the scope of a role.

Levels are determined by taking a number of relevant factors into account including individual and business performance, level of experience, scope of responsibility, compensation practices across the Group and the competitiveness of total compensation against both our competitors and companies of a similar size and complexity.
Company and personal performance will be taken into account during the review process. Under normal circumstances base salary and fees will increase by no more than the local rate of inflation over the period since last review.

In the event of a promotion or a significant change in the scope of a role, or changes in sector competitive pay or the need to counter a competitive external offer, the committee may exceed this limit.
Component and Purpose Operation Performance Maximum Annual Opportunity
Short-term incentives (details of how performance measures and targets are set are included in the notes to this table)
Cash bonus, Executive Share Awards (‘ESA’)
To drive the achievement of business priorities for the financial year and to motivate, retain and reward executives over the medium term, while maximising alignment with share owner interests.
Overview
The committee may invite executives to participate in the STIP under which a bonus can be made subject to performance measured over the financial year. Bonus opportunity is determined as a percentage of salary and fees.

Performance measures and targets are reviewed and set annually to ensure continuing strategic alignment. Achievement levels are determined following year-end by the committee, based on performance against targets.

Executive directors’ bonuses are delivered in the form of a cash award and a deferred share award (ESA), the latter constituting at least 50% of the total bonus achieved. The ESA will vest after a minimum of two years subject to continued employment, together with additional shares in respect of accrued dividends.
Judgement
The committee will use its judgement to set the performance measures and targets annually.
Malus provisions (ESA)
The committee has the ability to reduce any unvested ESA in certain situations, including when fraud or a material misstatement has affected the level of any performance-related remuneration.
70% subject to financial performance, either at a Group and/or divisional level depending on the role.

30% subject to personal objectives linked to the strategy of WPP or the relevant business area.

The committee will use its judgement in assessing performance relative to targets and expectations communicated at the start of the year and will consider unforeseen factors that may have impacted performance during the period.
Vesting schedule
The following table sets out the level of bonus payable for threshold and target performance as a percentage of maximum. Vesting operates on a straight-line basis between these points.
  Threshold Target (as percentage maximum)
Sir Martin Sorrell 0% 50%
Other executive directors 0% 67%
Group chief executive: 435% of base salary and fees.

Other executive directors: 300% of base salary and fees.

The value of any accrued dividends will vary depending on the size of the ESA awarded, dividends declared and share price over the deferral period.
Component and Purpose Operation Performance Maximum Annual Opportunity
Long-term incentives (details of how performance measures and targets are set are included in the notes to this table)
Executive Performance Share Plan (‘EPSP’)
To incentivise long-term performance and to focus on long-term retention and strategic priorities, while maximising alignment with share owner interests.
Overview
Executives may receive an annual conditional award expressed as a percentage of base salary and fees. Executives may also receive an award in respect of the number of reinvested dividends proportionate to the amount of the award vesting, the dividends declared during the performance period and the share price at the time the dividend is declared. Awards will vest subject to performance, measured over a period of five consecutive financial years.

In respect of merger and acquisition activity within the peer group, the committee has an established and operated policy that TSR outcomes should not be impacted by the speculation or actuality of takeovers of peer group companies (including WPP). This policy includes a minimum listing requirement, an approach for the reinvestment of proceeds from shares of companies that delist during the performance period and parameters for companies subject to bid speculation. Details of how this policy is implemented will be disclosed each year in the relevant Annual Report.
Discretions
In accordance with the EPSP rules that were approved by share owners at the 2013 AGM, if the committee considers that there has been an exceptional event or that there have been exceptional circumstances during a performance period that have made it materially easier or harder for the Company to achieve a performance measure, the committee may adjust the extent to which an award vests to mitigate the effect of the exceptional event or circumstances.
Malus provisions
The committee has the ability to reduce any unvested award in certain situations, including when fraud or a material misstatement has affected the level of any performance-related remuneration.
One-third relative TSR
One-third headline EPS growth
One-third average ROE

All measures are assessed independently of each other.
TSR is measured on a weighted basis against a peer group of business competitors that are selected according to size and relevance. This peer group is reviewed annually at the start of each cycle to ensure it remains robust, appropriate and relevant in light of WPP’s business mix. Half of the TSR element is measured on a local currency basis, half on a common currency basis.

EPS is defined as WPP’s headline, fully diluted, earnings per share. The EPS performance is calculated by taking the aggregate EPS over the performance period and calculating the compound annual growth from the financial year preceding the start of the period.

ROE is calculated as fully diluted EPS divided by the average balance sheet per share value of share owners’ equity during the year.
Vesting schedule
Awards will vest on a straight-line basis from 20% for threshold performance and 100% for maximum performance.
Conditional awards:

Plan maximum: 9.75 times base salary and fees.

Group chief executive: 9.75 times base salary and fees.

Other directors: four times base salary and fees.

The value of accrued dividends will vary depending on the level of vesting, dividends declared and share price over the performance period.
Component and Purpose Operation Performance Maximum Annual Opportunity
Long-term incentives (legacy plans with unvested awards)
Leadership Equity Acquisition Plan III (‘LEAP III’)
To incentivise long-term performance and to focus on long-term retention and strategic priorities, while maximising alignment with share owner interests.
Overview
Executives were invited to participate in the plan annually by the committee. In order to participate, individuals must have committed to hold an investment level in WPP shares which is determined by the committee, subject to an overall maximum, and must be held for the full five-year performance period. Investment levels were determined by the committee, subject to an overall maximum. A final number of matching shares will be awarded, proportionate to the investment, dependent on the performance of WPP. Executives may also receive an award in respect of the number of reinvested dividends proportionate to the amount of the award vesting, the dividends declared during the performance period and the share price at the time the dividend is declared. The Plan was closed to the grant of new awards at 31 December 2012.
Discretions
Following the end of the performance period, the committee undertakes a ‘fairness review’ to determine whether any exceptional events have impacted the outcome and that the resulting match is in line with financial performance relative to the comparator group and the underlying financial performance of the Group. Merger and acquisition activity will be treated in accordance with the policy set out under the EPSP above.
Malus provisions
The committee has the ability to reduce any unvested award under LEAP III in the event of, for example, fraud or a material misstatement which has resulted in a performance-related award being granted or vested at a level than it otherwise would have.
100% relative TSR measured on a market-capitalisation weighted, common currency basis.
Vesting schedule
The following table sets out the level of award that will vest for threshold and target performance as a percentage of maximum.
  Threshold Maximum
All executive directors 30% 100%
To achieve threshold vesting WPP must outperform at least 50% of the market-cap weighted peer group; to achieve maximum vesting WPP must outperform at least 90% of the market-cap weighted peer group.
The following maximum levels applied at the time of grant. No further awards can be granted under LEAP III, and none have been made since 2012.

Investment: one times an executive director’s total target earnings (base salary and fees plus target bonus). Award: Five times an executive director’s investment. 
Component and Purpose Operation Performance Maximum Annual Opportunity
Other items in the nature of compensation
Dividend Equivalent Payments (‘DEPs’) on the DSUs
To ensure that Sir Martin Sorrell receives an amount equal to the dividends that would be payable if he had taken receipt of and retained the shares underlying the DSUs.
The Company has previously received share owner approval to allow Sir Martin Sorrell to defer receipt of the DSUs. The Company makes a cash payment to Sir Martin Sorrell of an amount equal to the dividends that would have been due on the shares comprising the DSUs. No longer subject to a performance requirement as this was assessed at the point of vesting in 1999. The value of any accrued dividends will vary depending on the dividends declared during the deferral period.
Benefits
To enable the executives to undertake their role by ensuring their well-being and security.
The following benefits are payable in relation to travel and the dual headquarter split between the UK and the US to some/all of the executive directors. The provision of these benefits reflects external competitive practice, the complex nature of the Group and the significant amount of time spent travelling by the executives.

The typical benefits that executive directors receive may include a car and/or car allowance plus the use of a driver as required; medical, life and disability insurance; accommodation allowance in lieu of hotel expenses; tax and legal advice; home office support; club memberships deemed necessary for the role; and spousal travel.

Other benefits, such as those linked to the relocation of an executive, may be provided depending on the prevailing circumstances.
Not applicable. Set at a level that the committee feels is required in order for the executive to carry out their role. The maximum payable will not significantly exceed the payments made in 2013, although the committee may pay more than this if the cost of providing the same benefits increases, or if the executive relocates.
Pension
To enable provision for personal and dependant retirement benefits.
Pension is provided by way of contribution to a defined contribution arrangement, or a cash allowance, determined as a percentage of base salary and fees. Not applicable. Group chief executive: 40% of base salary and fees.

Other executive directors: 30% of base salary and fees.

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