WPP’s £43m man Sorrell prepares to repel boarders

That annual bunfight known as the WPP AGM takes place on June 9 at 8 Northumberland Avenue, a former hotel near Westminster which claims to be London’s most central venue.

So if any you WPP shareholders want to go along and shout at Sir Martin Sorrell (below) I’m sure you’ll be most welcome.

Two ‘shareholder advisory’ outfits, Glass Lewis and Institutional Shareholder Services have come out so far against CEO Sorrell’s pay – £43m last year against a derisory £29.8m the year before – and no doubt there’ll be others on the day. There usually are but, so far anyway, Sorrell hasn’t given any of the money back. He’s reckoned to have earned about £180m over the past decade – and that’s without the dividends he receives on his shares.

So let’s look at the case for and against his ‘compensation,’ as they say in the US where such generous rewards are slightly more commonplace.

For

WPP has performed strongly throughout the financial crisis and beyond. Its shares are up 16 per cent this year and it remains the biggest marcoms company worldwide, following the collapse of the merger between Omnicom and Publicis.

SMS has produced and implemented a clear strategy, which most shareholders seem to agree with. This is to concentrate on digital, data and growing in emerging markets (if China can be so described). Sorrell believes that ‘math men’ are taking over from the Mad Men of yore, and that pleases shareholders too. It makes WPP seem more solid than companies built on the efforts of what they see as temperamental and disloyal creatives.

WPP is one of the few world-leading British companies, all the more surprising as the marcoms industry as a whole is still dominated by the US. Despite a brief flirtation with Irish domicile (for tax reasons) Sorrell has kept WPP in the UK, which makes him (in some eyes) a rather unlikely national treasure.

Most of his pay package is based on agreed share and profit performance targets – so what’s the problem?

Against

WPP is a company built by acquisition and it’s having to run ever harder to deliver growth. At some point his strategy will run out of steam because there’ll be nothing big worth buying.

There’s no succession plan and Sorrell is 70. He runs the company like a personal fiefdom (he did found it 30 years ago, after all) and that won’t do in today’s ‘accountable’ age. He needs reining in and bashing him over pay is the easiest way to do it.

£43m is just too bloody much. The next highest paid boss of a London-based quoted company is the CEO of Royal Dutch Shell on about £20m. And keeping the world’s oil flowing is rather more important than advertising, marketing and media. WPP is out of kilter with the times.

Result

The result will almost certainly be another result for Sorrell – ie. he gets to keep his pay and his job.

If he lost the first he would almost certainly give up the second and WPP’s shareholders aren’t prepared to sail the choppy seas of the global economy without Admiral Sorrell at the helm. There isn’t anyone else (which, in this context, might seem a clever ruse on the part of SMS).

It can’t be pleasant for Sorrell to come under such regular fire but a delicate flower he is not. At some stage, maybe quite soon under new chairman Roberto Quarta, Sorrell will indeed be reined in. But not just yet.