A while ago we wrote that WPP boss Sir Martin Sorrell’s pay rise from £1m to £1.3m (which will trigger even larger bonuses) would be a ‘walkover,’ – shareholders wouldn’t necessarily be happy but the company was performing well so they’d just have to lump it.
But that was before the bosses of UK FTSE 100 companies began falling like flies thanks to newly-outraged shareholders. The highest-profile victims so far have been Trinity Mirror’s Sly Bailey and Andrew Moss, CEO of insurance group Aviva.
There’s a difference between these two and Sorrell of course: WPP is performing well while Aviva and Trinity Mirror are not, not in share price terms anyway.
As ever with these things the root cause of the problem seems to be Barclay’s ‘Diamond Bob’ Diamond, whose outrageous rewards (£17.5m last time round) and disinclination to pay anything himself (like tax incurred in the US) have succeeded in dropping a wasp into a hornet’s nest. Bob, of course, always survives even though the recent Barclays story of higher rewards for executives while shareholders’ returns reduce is a scandal.
In comparison WPP looks like a boy scout. Sorrell may have received a chunky £13m last year but half of that was through a long-term share incentive plan. Publicis Groupe’s Maurice Levy received rather more from a similar wheeze, although usually he ends up with less than Sorrell.
But the tricoteuses are out in London at the moment rather than Paris, although that might change with the election of Francois Hollande as France’s new president.
WPP director Jeffrey Rosen, head of its remuneration committee, has been scampering round big shareholders trying to persuade them not to vote against Sorrell’s pay at WPP’s forthcoming AGM on June 13 in Dublin (WPP is still, officially, an Irish company). Rosen is a New York investment banker, which might raise the odd shareholder eyebrow. Such people are hardly known for relating rewards to the real world.
The likeliest conclusion is that there will be a watering down of Sorrell’s new bonus arrangements, which mean he can be paid up to 500 per cent of his base salary (the newly enlarged £1.3m) in bonuses. The old deal was 300 per cent, which should be enough for anybody.
It’s not entirely inconceivable that any firmer action might lead Sorrell, who founded the company 25 years ago, to threaten to quit. But if he did, who would take over? Shareholders certainly don’t want this, not yet anyway. It’s more likely that they’ll complain about somebody else’s pay. Last year it was digital boss Mark Read’s nearly £900,000 pay package under the microscope.
One of the elements of Sorrell’s bonus deal is ‘succession planning,’ not something we hear much about at WPP. Perhaps a shareholder will take the opportunity to raise this at the pow-wow in Dublin. Now that would be interesting.