The Interpublic Group of Companies, Inc. (IPG) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Interpublic Group of Companies. Please note today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to the Chairman of the Board, David Thomas. Mr. Thomas, the floor is yours.

Thank you, and good morning, and welcome, everyone. I am David Thomas, Non-Executive Chairman of the Board, and we thank you for joining us this morning for the Interpublic Group Virtual Annual Stockholders Meeting. Above all, we hope that you, your families and those you hold dear are safe and well. Participating this morning are Philippe Krakowsky, our Chief Executive Officer and member of the Board of Directors; Ellen Johnson, our Executive Vice President and Chief Financial Officer; Andrew Bonzani, Executive Vice President and General Counsel; and Robert Dobson, our Senior Vice President and Secretary. Also joining us and participating this morning are the independent members of our Board of Directors, all of whom are standing for reelection. They are: Jocelyn Carter-Miller; Mary J. Steele Guilfoile; Dawn Hudson; Jonathan F. Miller; Patrick Q. Moore; Linda S. Sanford; and E. Lee Wyatt Jr. Also participating are members of the Computershare Shareowner Services, who are appointed as inspectors of election to count the votes and to certify the results of the voting. The Secretary reports that the holders of over 92% of the outstanding shares of common stock are present or represented by proxy. Therefore, a quorum is present, and we can conduct our business. [Operator Instructions] We will dispense with the reading of the minutes of the 2021 Annual Meeting, and we'll now move forward with the proposal set forth in our proxy statement. If you need a copy of the 2021 annual report or the proxy statement, the link to the annual meeting materials is provided online. If you have not yet voted or wish to change your vote, I would encourage you to do so now by clicking on the cast your vote link. The polls will remain open until the end of the meeting. The first order of business is the election of the directors to serve until the Annual Meeting of Stockholders in 2023. The information about our directors standing for reelection appears on Pages 4 through 7 of our proxy statement. The second item of business is the ratification of the appointment of PricewaterhouseCoopers as the independent public accounting firm of the corporation for 2022. This proposal appears on Page 23 of the proxy statement. The third item of business is the advisory stockholder vote on the compensation paid to Interpublic's named executive officers. This proposal appears on Page 25 of our proxy statement. Now that we have presented the proposals, we will address any questions on the proposals that are raised. Mr. Secretary, are there any questions?

Yes, there is 1 question from Gerald Matthews from the United Brotherhood of Carpenters. The question is, the U.S. SEC has proposed extensive new climate disclosures, including audited financial statements. If adopted, the disclosures will expand the oversight roles of the Audit Committee generally, which raises a concern. As climate-related disclosures takes the form of demanding regulatory requirement, how will the Audit Committee and PwC roles evolve to effectively handle these expanding responsibilities? Thank you.

Well, I think it will -- we certainly recognize the importance of ESG in our business. We actually have renamed our Governance Committee, the Governance and Social Responsibility Committee to review those items. In terms of what regulations come out, I think it will depend on what the actual statements are, what the actual rules are in that. But we will certainly comply with all of those. We also have available on our website a detailed ESG report that I would encourage you to take a look at. And we certainly, as a Board, do get frequent reports on sustainability and our impact on the environment.

There are no other questions, Mr. Chairman.

Okay. The final item of business is the stockholder proposal requesting that the corporation adopt a policy, providing for an independent Chairman of the Board. If the stockholder or stockholder representative is present to make the proposal, please state your proposal.

Yes. Mr. [ Rocher's ] line is open.

[ Frank Rocher ], Proposal 4, independent Board Chairman, sponsored by Kenneth Steiner. Shareholders request that the Board of Directors adopt an enduring policy and amend the governing documents as necessary in order that 2 separate people hold the office of the Chairman and the office of the CEO. This proposal simply asks our Board to maintain into the future, the current independent Board Chairman structure that the Board said, is functioning well now. Whenever possible, the Chairman of the Board shall be an independent director. This proposal topic won 52% support at Boeing and 54% support at Baxter International in 2020. Boeing then adopted this proposal topic in 2020. The roles of Chairman and CEO are fundamentally different and should be held by 2 directors, a CEO and a Chairman who is completely independent of the CEO and our company. This proposal also questions the independence of our current independent Board Chairman, Mr. David Thomas, with 18 years long tenure. As director tenure goes up, the director independence goes down. Mr. Thomas also received the second most negative votes at the 2021 Annual Meeting. Mr. Thomas came in second Mr. Patrick Moore, who received 48 million negative votes. A lead director is no substitute for an independent Board Chairman. A lead director cannot call a special shareholder meeting and cannot even call a special meeting of the Board. A lead director can delegate most of the lead director duties to the CEO office and then simply rubber stamp it, there is no way shareholders can be sure of what goes on. The lack of an enduring policy for an independent Board Chairman policy is an unfortunate way to discourage promising new outside ideas and an unfortunate way to encourage the CEO to pursue pet projects and will not stand up to effective oversight. Please vote, yes, independent Board Chairman, Proposal #4. Thank you.

All right, and thank you for presenting that. Interpublic's position on this resolution begins on Page 66 of the proxy statement. Mr. Secretary, are there any other questions to be raised at this time?

No, there are not, Mr. Chairman.

If there are no questions, I will turn the meeting over to Philippe, who will provide an update on our business.

Thank you, David. I'd like to begin by thanking our more than 57,000 colleagues around the world whose talent, professionalism, dedication continue to be central to our success. Our people are consistently delivering the complex integration of creativity, technology and data to clients across industry sectors and around the world. And this, in turn, is driving the levels of growth and margin that have distinguished Interpublic for a number of years now. In 2021, we were once again pleased to deliver outstanding performance with organic growth of 11.9%, adjusted EBITDA margin of 16.8% and adjusted diluted EPS of $2.60. The strength of our business reflects more than just the forces that drove a rapid macroeconomic recovery in 2021 from the 2020 impact of the pandemic. IPG's multiyear sector-leading results are a function of a set of strategic decisions made over the long term, which have positioned us with the capabilities and tools required to help clients as businesses and brands thrive in increasingly digital economy. Another important pillar of our success is our long-standing commitment to ESG. David spoke to that a little earlier, and this is a key strategic priority for the company, which includes sustainability, diversity, equity and inclusion. During 2021, we were pleased to be named to the Dow Jones Sustainability Index North America for the second consecutive year. We were also named to the Bloomberg Gender Equality Index for the third year in a row, which is another important honor. And in the HRC Corporate Equality Index, we were named a Best Place to Work for LGBTQ+ talent, and that's something that's been going on for more than 10 years. In addition, IPG was named to Newsweek's list of America's most responsible companies 2022, and we ranked fifth among all U.S. companies in Forbes and Statista's list of America's Best Employers for Diversity 2022. As we turn to page to this year, and the world is confronted with the invasion of Ukraine, our IPG colleagues have been doing their part to help ease the burden of those most immediately affected by the war through everything from assisting refugee resettlement to hosting displaced colleagues in our workspaces throughout Europe to financial donations to humanitarian organizations. Further, as a company, we've disengaged from our Russian operations. And obviously, amid this ongoing tragedy, we continue to hope for a de-escalation of the war just to bring an end to the human suffering, we are all witnessing. Last, before turning things back to David, I just like to speak briefly to our financial performance at the outset of this year. In the first quarter, we reported continued strong growth across a broad range of geographies and client sectors, and these results reflect our ability to deliver marketing and media solutions that bring together best-in-class creativity, technology and data. As we meet today, it's fair to note that the strong tone of our business in the first part of the year contrast with the financial markets that are discounting a more uncertain global economic picture. We understand the reasons for these macro concerns, and we'll continue to stay close to our clients and our people. In our review, the advertising, marketing and media economy, while not immune to global economic factors remain sound, and our service is highly relevant to the success of our clients. We will, of course, remain disciplined in managing our operations and maintaining the quality of our balance sheet. And given the great talent that we have across the company, a highly relevant strategy and portfolio of offerings and a very strong commitment to our clients and to our partnership with clients, we believe we remain well positioned to enhance value for the full range of our stakeholders. And with that, I'm going to turn things back over to David.

Okay. Thank you, Philippe. That brings us to the end of our meeting. The polls are now closed, and we have the results of the voting. All nominees have been elected as directors. The ratification of PricewaterhouseCoopers was approved by stockholders. And the advisory vote on the compensation paid to named executive officers was approved by stockholders. The stockholder proposal requesting that the corporation adopt a policy providing for an independent Chairman of the Board was not approved by stockholders. The Secretary has a tally of the actual votes on these proposals. There being no further items of business, this meeting is adjourned. Thank you all for attending, and everyone, please be safe.

This concludes the meeting. You may now disconnect.