Photo: World Economic Forum
Martin Sorrell, CEO of WPP Group, the world’s largest advertising holding company, made a blistering rebuttal to critics of his pay package in the Financial Times, in which he challenges the British government to tax him if it believes he is paid too much.The Business Insider Advertising Rich List puts Sorrell’s annual compensation at $11.6 million, making him the fifth-best paid executive in the business. However, his annual income is only part of his net worth. WPP has an unusual compensation package for its executives which requires them to buy their own stock with their own money. If they meet their targets, they’re rewarded with multiples of the stock they have at stake. The risk is large but so is the reward; Sorrell consistently gets high grades from U.S. compensation monitors because, unlike his peers, he isn’t given stock, he must buy it.
As Sorrell writes in the FT:
I now have a stake worth about £140m, which represents less than 2 per cent of the company, and almost all of my net worth, which almost all advise me is highly risky. I have no contract with the company, am “at will” and can be dismissed or leave instantly without compensation or restriction …
He then makes a fairly accurate case that among his peers he’s not the best paid (Publicis Groupe’s Maurice Levy and MDC Partners’ Miles Nadal probably got twice what Sorrell got in 2011/2012). Even if he is overpaid, Sorrell says, he’s running a private sector company, so his critics can go take a running jump:
WPP is not a public utility. If Britain wants world champions in the private sector, we have to pay competitively, as ISS and other proxy services inconsistently accept for our direct competitors, particularly those based in the US, but not over here. If the government or institutions believe pay is excessive, tax it. Do not fiddle with the market mechanism. WPP is not a failure, it is a success.
There is, of course, little chance of the U.K.’s Conservative government increasing his taxes, considering Sorrell’s outsize influence on British tax policy. (He basically personally persuaded Prime Minister David Cameron to lower U.K. corporate taxes by moving WPP’s HQ to Dublin and refusing to move it back again).
Note: You can tell Sorrell is both amused and angry about the debate on his pay because he used the words “invidious” and “wounding” in his op-ed—they’re two of his favourite words.
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