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Sir Martin Sorrell at sharp end of investor revolt at WPP AGM Sir Martin Sorrell at sharp end of investor revolt at WPP AGM
(about 3 hours later)
More than a third of shareholders at the advertising giant WPP have refused to back the £70m pay package handed to its boss, Sir Martin Sorrell. Sir Martin Sorrell and the board of WPP faced a barrage of criticism at their annual general meeting after a third of shareholders opposed the £70m pay package handed to Sorrell, chief executive of the world’s biggest advertising company.
Including abstentions, 34.2% of WPP investors failed to support the company’s pay report at the company’s annual general meeting in London, while 65.8% backed it. At the AGM in London, 33.5% of shareholders voted against WPP’s remuneration report and 66.5% backed it. Including abstentions 34.2% of investors failed to support the report. The vote was the third worst suffered by WPP, where Sorrell’s pay has irked shareholders for many years.
The vote indicates a sizeable shareholder revolt, although it does not match that seen at BP, where almost 60% of investors voted against the £14m pay package of its chief executive, Bob Dudley, after the oil group posted an annual loss of £3.6bn. Standard Life and Hermes, two of Britain’s most influential fund managers, voted against the pay report and sent senior officers to the meeting.
Shareholders who voted against Sorrell’s pay package – one of the biggest in British corporate history – included Standard Life and Hermes. Both also expressed impatience with the progress made on succession planning for the 71-year-old. Hermes described Sorrell’s pay as excessive. Euan Stirling, head of at Standard Life, said WPP’s current pay plan could hand Sorrell more than 15 times his £1.15m salary. “We expect that is more than would be required to recruit, retain or motivate even someone with the redoubtable talents of Mr Sorrell.”
Euan Stirling, of Standard Life Investments, said at the annual meeting in London: “The current policy could result in the chief executive receiving over 15 times his base salary of more than £1m should all the performance conditions be met. We expect that is more than would be required to recruit, retain or motivate even someone with the redoubtable talents of Mr Sorrell.” Deborah Gilshan, corporate governance counsel at the Railways Pension Scheme, said pay at WPP was “a risk to its reputation and its licence to operate” from society.
Deborah Gilshan, corporate governance counsel at the Railways Pension Scheme, said pay at WPP was out of line with the interests of shareholders and other stakeholders in the company and was “a risk to its reputation and licence to operate” from society.
She added: “We continue to question the logic of the board and its compensation committee to [determine] pay to motivate, incentivise and retain the CEO and other senior executives.”
The WPP chairman, Roberto Quarta, told Gilshan: “Rest assured we hear your comments and your voice today and certainly we will take them into account as we … consult at the end of the year.”The WPP chairman, Roberto Quarta, told Gilshan: “Rest assured we hear your comments and your voice today and certainly we will take them into account as we … consult at the end of the year.”
Another shareholder said questions on pay were pathetic and asked by small-minded people. “It has all been agreed so I don’t know what they’re carping at.” The revolt over Sorrell’s pay is the latest in a string of defeats and bruising protests for company boards this year. Starting with the 60% vote against BP boss Bob Dudley’s £14m pay two months ago, big shareholders have taken issue with the size of some executive pay deals.
Sorrell, the highest-paid boss of any FTSE firm, told the annual meeting that people forgot he reinvested his pay into WPP. Quarta said WPP would take account of investors’ change of mood as the company puts together a new pay policy for a binding vote next year.
Sir John Hood, who chairs WPP’s remuneration committee, said 89% of Sorrell’s share pay was under the incentive plan agreed at the 2009 annual meeting and that a more conservative plan was introduced in 2014 and approved by about 80% of shareholders. Sorrell, 71, who started WPP from scratch using borrowed money in 1985, said the idea from the start was that he would have a big stake in the company and run it as an owner. He has reinvested all his pay into WPP and only took money out to pay for his divorce in 2005.
He said the company would consider how share plans might play out after its market value doubled in five years, triggering the big payout. He also said WPP had to pay the rate needed to get the best people in a competitive market. “WPP by virtue of that is unique and should be looked at in a unique way,” he said after the meeting. “If there is something wrong with building a company from two people to 194,000 people where 600,000 people depend on WPP for their livelihoods then mea culpa.”
But he added: “We will of course be consulting with our major shareholders as we move forward to consider our policy document that we will present to shareholders next year.” He said the board would try to include concerns in the pay policy so that a significant majority would support it. The vote on the pay policy, presented every three years, is binding. A small shareholder said questions on pay were pathetic and asked by small-minded people. “It has all been agreed so I don’t know what they’re carping at.” But another said Sorrell’s dominance of the company meant the board bent to his will because they feared him leaving.
Hood had previously defended Sorrell’s £70.4m cash and shares package for 2015 as the “result of an outstanding set of returns to share owners” of the group, which owns the advertising agencies JWT and Ogilvy & Mather. Sir John Hood, who chairs WPP’s remuneration committee, said 89% of Sorrell’s share pay was under the incentive plan agreed at the 2009 annual meeting and that a less generous plan was approved by about 80% of shareholders two years ago.
He said the company would consider how share plans might play out after WPP’s market value doubled in five years, triggering the big payout. He also said WPP had to pay the rate needed to get the best people in a competitive market.