More than 50 per cent of WPP shareholders are likely to vote against boss Sir Martin Sorrell’s recent pay package according to a report in the Financial Times.
Advisory group Institutional Shareholders Services (ISS) says it’s advising its client to vote against Sorrell’s £13m package (about half of which is a ‘new’ deal) and other shareholders are rumbling away too, one (unnamed) shareholder telling the FT that Sorrell (pictured) acts more like an owner than a paid manager.
There are three issues here.
One, is the new bit of Sorrell’s deal over-generous? His base pay has been raised for the first time in ten years, from £1m to £1.3m (the original plan was to raise it to £1.5m). Nobody would be likely to argue with this, the problem is that his bonuses depend on the base salary. And the maximum bonus entitlement has been raised fronm 300 per cent of base salary to 500 per cent. Last year (2011) he received 385 per cent of base salary as a bonus bringing the total amount to about £6.5m. On top of this there were various long-term incentives, already agreed, bringing the total to £13m or thereabouts.
So is that too much? By the standards of his peers – John Wren at Omnicom, Michael Roth at Interpublic and Maurice Levy at Publicis Groupe – it isn’t, but this is ‘shareholder spring’ in the UK and big bucks are under the cosh. Levy has been hammered recently for trousering a €21m bonus, but that was more of a one-off than Sorrell’s package.
The second issue is the owner/manager bit. Sorrell is unusual in that he started the company where he remains CEO, 25 year later. So he could be forgiven for feeling a touch proprietorial about things. Also he’s a rather hyperactive CEO, as his senior managers have no doubt noticed over the years. But he does help to bring in the loot, as opposed to ‘just’ managing the company and investors.
WPP ‘Teams,’ bespoke arrangements to handle very large clients, are very much his idea; it’s safe to say that the heads of his various agencies hate the idea. But this has paid off with Team Detroit for Ford and recent big new business gains from Miller Coors and Bank of America in the US and News Corporation and Vodafone in the UK. Would these deals have been struck without Sorrell? Which raises another issue, of course, which is that of succession planning. This is another thing shareholders will be keen to hear about at the AGM in Dublin on June 13.
The third issue is, what will Sorrell do if shareholders give him, as our unnamed source above promised, “a bloody nose?” He may, of course, back down before then but he won’t be inclined to. But neither will he tell them all to get lost and stomp off into Grafton Street in search of a Guinness or 12.
The answer to the above is, we don’t know. But it does appear that WPP remuneration committee chairman Jeffrey Rosen’s efforts to talk round shareholders have failed, maybe made things worse. Rosen is a Wall Street investment banker and such people are currently about as popular with British investors as Colonel Gaddaffi was with Libyans in that other spring that’s been in the news recently.
We do know that the great man will be mightily pissed off about all this, despite public comments that it’s business as usual. WPP is now established as the world’s biggest marcoms company, it’s pulling in new business from all over the place and Sorrell might reasonably have expected a warm reception at the AGM.