Shareholders vote down Aegis pay deal

Shareholders in Aegis, the media-buying agency, finally lost patience with the company and hit back at a £2.35m "payment for failure" enshrined in the contract of Doug Flynn, its chief executive.

Shareholders in Aegis, the media-buying agency, finally lost patience with the company and hit back at a £2.35m "payment for failure" enshrined in the contract of Doug Flynn, its chief executive.

Led by the National Association of Pension Funds (NAPF), shareholders took the dramatic step of voting down the company's remuneration report at yesterday's annual meeting.

It is the most significant shareholder revolt since the remuneration report of GlaxoSmithKline was rejected last year. The NAPF has decided to get tough with companies that still insist on flouting corporate governance best practice.

Angry investors were objecting to the terms of Mr Flynn's severance pay, which is set at two years' salary plus twice his annual bonus.

In 2003 he was paid a basic salary of £588,000 plus a cash bonus of another £588,000 that would give him a pay-off of £2.35m if Aegis wanted to terminate his contract.

In the separate event of Aegis being taken over, Mr Flynn would get two years' salary plus an amount equal to his bonus paid in the previous 12 months, plus benefits which last year were £32,000, giving him a pay-off of £1.8m.

Aegis said it would now consult with shareholders. However, it is understood to be surprised by the NAPF's actions. The association last year advised members to abstain on the issue of Mr Flynn's contract, which has been in place since 1999.

A spokesman for the NAPF was adamant that investors would no longer stand for excessive contracts.

"There are obviously concerns from the shareholders and the company would do well to listen to them," he said.

Despite yesterday's corporate governance setback, Aegis announced a positive start to its new financial year with revenues in the first quarter up 10.9 per cent and like-for-like sales up 4.8 per cent. Aegis said the outlook for the advertising market was marginally more positive than its previous forecasts.