WPP boss Sir Martin Sorrell faces his shareholders today, some of whom will be more than a little pissed at his 2015 pay cheque of around £70m (his actual salary is £1.2m).
The rest comprises bonuses and share awards under the company’s controversial LEAP scheme which, although it has been changed at the insistence of shareholders, still has a year to run. Sorrell (below) is by far the highest paid CEO in the UK and earns a staggering 196 times the average WPP employee’s pay.
Sorrell who co-founded WPP 30 years ago will say, as he often does, that WPP has produced stellar returns for its shareholders over the past five years or so. Indeed it has, the company is worth £20bn now compared to £10bn then. This at a time when other big corporations in the both the UK and US are struggling: even the mighty Apple and Google owner Alphabet have produced disappointing early 2016 numbers.
It’s hard to tell quite how well WPP is doing as it only produces profit numbers twice yearly although it discloses other information quarterly. The half year for 2016 won’t be available for a while yet.
Sorrell will doubtless ride out any storm (it’s likely to be the teacup variety). What he may find more uncomfortable is questioning over WPP’s succession plan (he’s 71). In theory this is none of his business, it’s the responsibility of new chairman Roberto Quarta who’s already said that a plan is in place and hinted that the board thinks five years max for Sorrell is the right time scale.
Sorrell, of course, may not agree. It may not be his decision but he’s the person who decides who does what in the company which, in effect, determines their succession chances. So far he’s been careful not to have anything like a COO, with responsibilities across WPP’s advertising, media buying, research, branding and healthcare operations.
WPP, along with the other big marcoms companies, is currently embroiled in a messy spat with the US Association of National Advertisers which has produced a report by K2 and Ebiquity on ‘undisclosed media rebates.’ All the marcoms giants say they don’t do it, K2 and Ebiquity say the practice is rife although they haven’t named names. They can’t both be right.
Media investment management, as WPP calls it, is the most profitable part of its business. So there is a connection – sort of – between this and Sorrell’s pay.
Which won’t be lost on some of WPP’s clients. But, like Sorrell’s pay and investors, there doesn’t seem to be that much they can do it about. WPP is just too big to ignore.
WPP has produced a trading update for the first four onths of 2016, unusual but timely for the AGM. It’s as follows:
*Reported billings for first four months up 7.9% at £16.230 billion and up 6.0% in constant currency
*Reported revenue for first four months up 10.7% at £4.182 billion, up 5.1% at $5.986 billion, up 5.0% at €5.384 billion and up 0.1% to ¥680.109 billion, continuing to reflect volatile exchange rates
*Constant currency revenue up 8.8%, like-for-like revenue up 4.3%
*Constant currency net sales up 7.2%, like-for-like net sales up 3.1%
*First four months revenue, net sales and profits well above budget and ahead of last year
*Constant currency net debt at 30 April 2016 up £589 million on same date in 2015, with average net debt in first four months of 2016 up by £746 million over same period in 2015, continuing to reflect strong acquisition activity and continuing share buy-backs