Sorrell's pay deal vetoed by WPP shareholders

Sir Martin Sorrell, boss of global advertising agency WPP, faced a shareholder revolt today over his proposed £6.8m pay package.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013

In the latest chapter of the unfolding 'shareholder spring' saga, 60% of WPP's shareholders this afternoon vetoed the firm’s recent executive pay report, which included a 60% pay rise for boss and founder Sorrell. Total proposed remuneration for the year: £6.8m. However, 98% of shareholders voted in favour of Sorrell's board position. 

But the £6.8m isn’t even the half of it. Literally. A report by proxy voting agency Manifest detailing the earnings of the UK’s most well paid execs puts Sorrell on an actual realisable pay figure of £11.6m, after all his bonuses, long-term incentives, share options (Sorrell received nearly £6m in shares last year) and other sweeteners have kicked in. In the UK, Sorrell’s earnings are second only to Barclays boss Bob Diamond on £20.97m.

But is the £11m pay package really so shocking? Sorrell is the boss of the largest advertising agency in the world. And the business is doing well: WPP posted a profit of £1bn last year, the first time the agency has passed the billion-pound mark since Sorrell founded the firm in 1985. As a result, Sorrell reckons his souped up pay package ‘rewards performance, not failure’. That being the chief criticism leveled at overpaid directors at poorly performing firms.

But shareholder advisory body Pirc, which is stoking the fires of shareholder dissent, claims that the issue of performance goes deeper than pure profit. It cites the company’s poor acquisition record, which has led to £1.3bn in write-offs in recent years. The Association of British Insurers (ABI) has also joined the fray, issuing a ‘red top’ alert over WPP's pay report, its strongest possible warning.

Nevertheless, even a majority vote against the pay package (made up of £1.3m salary, £2m annual bonus, £3m deferred shares and other benefits), would not be the final word on the issue: WPP could choose to ignore investor sentiment altogether. 

And it won’t be the first time WPP’s shareholders have been disappointed over pay. Although ‘shareholder spring’ is an interesting revolutionary idea, investors have protested about pay at WPP for time immemorial. Last year, 42% of shareholders voted against the remuneration report.

More grist for business secretary Vince Cable’s mill as he attempts to give more power to shareholders (albeit, while changing the annual vote to a poll every three years…). Gloves off in Dublin this afternoon. Expect bantamweight Martin to come out fighting.

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