Advisory groups predicted a shareholder revolt in reaction to WPP chief executive Sir Martin Sorrell’s 43% pay rise to £43 million ($US66 million) last year — but the boss of the world’s largest advertising agency holding group managed to come away from the company’s annual general meeting relatively unscathed.
Just over 22% (19.5% against and 2.7% in abstentions) voted against Sorrell’s pay package. That’s fewer than the 28% who voted against Sorrell’s compensation last year.
While shareholder advisory groups advised those with WPP stock to vote against the compensation proposals, just one such group spoke up against Sorrell’s pay at the AGM, held in central London on Tuesday (June 9.)
Roger Geary, a representative of the ShareAction charity, said Sorrell’s compensation had reached an “astronomical level,” more than double the amount of the next best-paid FTSE 100 firm. Geary added that Sorrell’s compensation not only did not offer value to shareholders, but presented a “significant risk to WPP’s reputation” to investors and the public.
Instead, ShareAction said the money could be better spent increasing investment in the company and staff. Geary estimated that Sorrell’s compensation could pay 2,378 people on the London Living Wage of £9.15 per hour.
In response, outgoing WPP chairman Philip Lader said that the amount paid to Sorrell “is certainly a large quantum,” but added that 92% of that amount was variable and performance-based, over a period of five years. This plan was supported by 83% of shareholders when implemented, according to Lader, who mentioned that Sorrell had — alongside almost two dozen senior executives — were also required to make a personal investment, which is “highly unusual.”
“The amount [paid to Sorrell] is equivalent to one-third of the 1% of the increase in value to our shareholders over this five-year period,” Lader said.
Later on in the meeting, the head of governance and stewardship at Standard Life Guy Jubb questioned the “Sorrell centricity” at the company.
Jubb said: “We have been concerned for some time by the perception that Sir Martin has the potential to dominate the board’s decision making and process associated therewith … these concerns have been amplified by not only Sir Martin’s compensation arrangements — which, for the avoidance of doubt, we oppose — but also a lack of transparency associated with the board’s approach to dealing with what the chair describes as the ‘succession elephant.'”
On succession planning, Lader countered that while the board may not have been as transparent as shareholders would like about who to replace 70-year-old Sorrell at the top when the time comes, “I don’t apologise for it.”
He said the lack of transparency about who might be lined up to become WPP’s CEO is due to the fact that the skills required for the network’s boss today may be very different to those needed in a few years time — so it might be disrespectful to the individuals involved to be named now. Lader also said the network’s strength is co-operation between different companies, and “if we were to name five, to seven, that would not help the co-operative spirit among leaders.”
But, overall, shareholders who spoke up at the AGM were complimentary of the company, which, in the first four months of the year reported an 8% increase in revenue to £3.8 billion in sterling (although this was down in US dollars 1.9% to $US5.7 billion.) The board also decided to increase its dividend pay-out ratio to a target of 50% (up from 45%,) which it expects to be achieved by the end of 2017.
One independent shareholder, who identified himself as Mr Hudson, said: “Martin, I can tell you: he’s worth every penny, because without him you wouldn’t have all the money. I suggest if you don’t like what the board is doing, sell your shares, because it really irritates me, all the publicity that was put in the press about Martin, [who] without him, we wouldn’t be in here.”
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