Sir Martin Sorrell is in the money: the WPP chief executive netted a staggering £36m in 2014 from a controversial, now-expired share incentive scheme. The best-paid boss in the FTSE 100 has without a doubt performed well, but that well? Really?
Sorrell, who founded WPP 30 years ago, was granted the five-year-vesting 2.3 million shares in 2010, when they were worth £16.9m. Over five years, WPP’s market capitalisation increased 133% to £17.8bn, far outstripping the FTSE 100’s 21% rise. Total shareholder return (TSR - the share price increase plus dividends) was 172%, the company said in a stock market statement. WPP also outperformed its bitter rivals Omnicom and Publicis, whose TSR was 120-130% over the same period, according to the FT.
Not bad. But on the other hand WPP’s share price actually fell 2.5% in 2014. Profits did rise 12% to a record £1.45bn, but Sorrell’s share payout increased rather more – up 56% from £23m in 2013. He probably makes more than 1,000 times what most of his employees take home.
No wonder, then, that shareholders revolted in 2012, voting 60% to end the scheme. But the controversy clearly hasn’t ended there. For the last two years almost a quarter of investors voted against WPP’s remuneration or abstained. And there are still two more years of potentially enormous windfalls to come for Sorrell and other top execs, from shares they bought in 2011 and 2012.
Sorrell, for his part, has always been unapologetic about his pay, unlike many CEOs who keep their head firmly below the parapet. In a controversial FT op-ed in 2012, he pointed out that almost all of his then-£140m-net worth was invested in WPP shares. 'I thought that was the object of the exercise, to behave like an owner and entrepreneur and not a bureaucrat,' he argued. Except, of course, he isn't actually WPP's only owner any more.
This year’s award couldn’t have really come at a worse time, either. Just six weeks before the General Election, Sorrell will now be target numero uno for any politicians looking to cash in on popular anger over executive pay. MT wouldn’t be surprised, though, if they manage to miss one rather crucial point: Sorrell sold £17.4m worth of his newly-vested shares to cover his rather enormous tax bill from the award.