Ad agency holding company Omnicom had a ho-hum 2011—revenue and net income were up and the stock barely moved—but that wasn’t reflected in CEO John Wren’s compensation. He got a 43 per cent pay raise, to $15.4 million, according to an SEC filing.
The company justified this by pointing to Wren’s historic track record of managing ad agencies such as BBDO, DDB and TBWA Worldwide:Over the past 10 years under Mr. Wren’s leadership, the Company has doubled its revenues and net income while returning 95% of its cumulative net income during that period to Omnicom shareholders in the form of dividends and share repurchases. Since becoming Chief Executive Officer, Mr. Wren has built and led a management team that has averaged greater than 23% return on equity annually.
Last year—the year actually reflected in Wren’s pay, not “the past 10 years”— OMC fell 3 per cent to $44.58 on a revenue increase of 10.6 per cent to $13.8 billion; and a net income increase of nearly 15 per cent to $953 million. Of the revenue increase, only 6.1 per cent was organic—the rest came from acquisitions.
Wren has a history of out-sized compensation for modest performance, usually through leveraging in his incentive pay that rewards him even when he sucks at his job. In 2009, when OMC hit historic lows, he was given options on the stock which became worth nearly $8 million once the recovery kicked in.
As part of Wren’s 2011 pay, he received $4.3 million in “performance restricted sock units.” But as this disclosure makes clear, he still receives 50 per cent of his target PRSU’s even if his company is the worst performer of all its peers.
Also note that the cash bonus portion of Wren’s pay has risen from $5 million in 2009 to nearly $10 million today.
Wren also gets paid if he dies: A $20.4 million “golden coffin” death benefit kicks in if he kicks the bucket (see page 33).
It doesn’t stop there.
Wren also took $136,319 of personal time in the company’s private aircraft last year—that’s vacation travel, not schmoozing clients.
Here’s the summary table (click to enlarge):
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