WPP CEO Sir Martin Sorrell’s base pay last rose from £1,m to £1.3m (relatively modest by current CEO standards, as he says) but his pay and benefits package rose from £4.23m to £6.77m including a payment from WPP’s short term bonus scheme.
On top of this he received nearly £5.6m of shares under the company’s Leadership Equity Acquisitions Plan (longer-term bonuses for senior managers) bringing the total to around £13m. WPP is expected to pay out around £500m in bonuses to senior managers under this scheme.
And the question is: is this too much?
You can argue that most CEOs are overpaid these days, they and their companies would argue that if you need the best talent you have to pay top rates. Sorrell’s rewards are certainly not out of line with the pay of his peers like John Wren of Omnicom and Maurice Levy of Publicis Groupe.
He also has a substantial share stake in WPP, built up over 25 years or so, worth about £160m (and nicely topped up in 2011, of course).
Sorrell can point to WPP’s 2011 profits breaking the £1bn barrier for the first time, with revenue and margins also increasing nicely. But it’s roughly the same story across the marcoms sector. Another job of a CEO is to take the right big bets on what’s around the corner. How has he performed in this regard?
WPP has made three big bets in recent years: on digital, expanding in emerging markets and on research (or consumer insight as it prefers to call it).
Digital is now about 30 per cent of its revenues, so that box can be ticked. Interestingly, though, digital’s increasing share of the bigger marcoms companies’ revenue seems to be slowing.
Emerging markets have paid off handsomely for WPP, it’s the biggest Western marcoms company in both China and India and has been energetic in moving into other markets like Vietnam. Arguably it’s less potent in Latin America.
Research has been a drag on the company since it paid £1.1bn for TNS back in those pre-financial crisis days of 2008. WPP’s latest results claim some signs of growth in the Kantar research division and the company is trying hard to integrate its pile of data with its digital media activities, instanced by the recent deal with Indian IT giant Infosys to form BrandEdge. But the jury’s still out on this one.
Sorrell’s next big task is succession planning (he’s 68 next February). There are no signs at all that his energy or mental nimbleness are declining, rather the opposite. But within five years or so WPP will require a new boss and it’s not easy to see who that might be or even where they might come from.
A lot of WPP’s ad business depends on Sorrell’s ability to schmooze fellow CEOS, in particular by persuading them that his favoured ‘Team WPP’ structures – pulling the best talent from WPP’s various agencies – is the way they should go. So whoever takes over has to be able to handle this client-facing aspect of life as well as the financial side.
That is a pretty daunting job description. One that might well carry a rather higher base salary than £1.3m.