High pay witch hunt is a client issue for WPP and Sorrell

I see that the UK government, via a body called the Investment Association, has gone ahead with its threat to “name and shame” company bosses whose pay, in its words, risk damaging “the social fabric of our country” by paying bosses too much.

Essentially they’re bosses whose pay has been opposed by a significant minority of shareholders, without affecting the aforementioned pay, of course.

The usual suspects are there, including the bosses of Burberry and Sky, and, of course, WPP’s Sir Martin Sorrell (below). His pay fell last year to £48m from £70m due to a tweaking of the bonus scheme.

It will therefore be interesting to see what his pay turns out to be in 2017 (which will be revealed next year) after further tweaks to the bonus scheme and, crucially, a stuttering performance this year from WPP.

In previous years WPP has been able to say that the company has significantly out-performed its stock market peers, by about double. This year, though, the share price has fallen 30 per cent after WPP reported little or no growth.

These bonus schemes are fascinating because they’re not based solely on the obvious: growth and the share price. So-called remuneration consultants are expert at devising fiendish schemes whereby bosses get a bonus even though the company has gone backwards. Sorrell’s package is said to include a value placed on the company’s progress towards “horizontality,” his fabled desire to get the rambling empire working as one – for clients anyway.

Just as interesting, although impossible to measure, is whether or not Sorrel’s high pay contributed to the current revolt by clients objecting to the profits of holding company-owned media agencies from sources largely unknown to them. Such as rebates from media owners – the Daily Mail has apparently put aside £20m to cover these in its latest numbers – and trading digital inventory on their own account.

While holding company-owned agencies have been moaning for years about clients grinding down their fees – just one or two per cent equivalents are common in media buying – the holding companies have been reporting margins of around 13 per cent. How come?

And how can WPP afford to pay its boss £70m or £48m in such circumstances? It may not be a large sum in the context of WPP’s earnings but it suggests there’s a money tree somewhere in the WPP garden.

You May Also Like

advertising featured Sir Martin Sorrell WPP

About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.