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| WPP's Sorrell takes £150,000 pay cut after receiving nearly £18m last year | WPP's Sorrell takes £150,000 pay cut after receiving nearly £18m last year |
| (5 months later) | |
| Sir Martin Sorrell has accepted a £150,000 pay cut and a 20% reduction in his potential bonus payout in a bid to head off another WPP shareholder revolt, as it emerged he received total remuneration of almost £18m last year. | Sir Martin Sorrell has accepted a £150,000 pay cut and a 20% reduction in his potential bonus payout in a bid to head off another WPP shareholder revolt, as it emerged he received total remuneration of almost £18m last year. |
| Sorrell, chief executive of WPP, world's largest marketing services group, has been under pressure to curb his annual payouts after investors handed him a humiliating defeat at last year's annual general meeting, voting to reject the company's remuneration report. | Sorrell, chief executive of WPP, world's largest marketing services group, has been under pressure to curb his annual payouts after investors handed him a humiliating defeat at last year's annual general meeting, voting to reject the company's remuneration report. |
| As well as a sweeping overhaul of Sorrell's remuneration, WPP is to make wide-ranging changes to its board, replacing the chair of its remuneration committee and appointing four new non-executive directors in a bid to inject new blood and appease shareholders who accuse the company of complacency. | As well as a sweeping overhaul of Sorrell's remuneration, WPP is to make wide-ranging changes to its board, replacing the chair of its remuneration committee and appointing four new non-executive directors in a bid to inject new blood and appease shareholders who accuse the company of complacency. |
| The new non-executive board members are: Jacques Aigrain, chairman of the markets clearing house LCH Clearnet; Hugo Shong, a Chinese venture capitalist; Roger Agnelli, a former chief executive of Vale and Bradespar; and Sally Susman, a senior executive at Pfizer. | The new non-executive board members are: Jacques Aigrain, chairman of the markets clearing house LCH Clearnet; Hugo Shong, a Chinese venture capitalist; Roger Agnelli, a former chief executive of Vale and Bradespar; and Sally Susman, a senior executive at Pfizer. |
| WPP's 2012 annual report, published on Tuesday, reveals that Sorrell received total remuneration of £17.6m last year, a 47.6% year-on-year increase over the £11.9m he earned in 2011. However, it laid down sweeping changes to how much he can earn in the future. | WPP's 2012 annual report, published on Tuesday, reveals that Sorrell received total remuneration of £17.6m last year, a 47.6% year-on-year increase over the £11.9m he earned in 2011. However, it laid down sweeping changes to how much he can earn in the future. |
| Sorrell received a base salary of £1.3m and a cash-and-shares bonus of almost £3.1m last year – 268% of his base pay – with the surge in total remuneration fuelled by an £11.4m award of WPP shares as part of the company's controversial long-term incentive programme, the Leadership Equity Acquisition Plan. | Sorrell received a base salary of £1.3m and a cash-and-shares bonus of almost £3.1m last year – 268% of his base pay – with the surge in total remuneration fuelled by an £11.4m award of WPP shares as part of the company's controversial long-term incentive programme, the Leadership Equity Acquisition Plan. |
| In 2011 Sorrell received significantly less, £3.2m, from the scheme, which is awarded separately from his annual bonus. The remainder of Sorrell's 2012 pay is made up of benefits, dividend equivalents and pension. | In 2011 Sorrell received significantly less, £3.2m, from the scheme, which is awarded separately from his annual bonus. The remainder of Sorrell's 2012 pay is made up of benefits, dividend equivalents and pension. |
| The main cash-and-bonus element of Sorrell's total remuneration – excluding his Leap award and pension payment - fell 30% year on year. | The main cash-and-bonus element of Sorrell's total remuneration – excluding his Leap award and pension payment - fell 30% year on year. |
| Sorrell has accepted a £150,000 pay cut, taking his salary to £1.15m, which will impact his potential bonus payouts and also share awards under a new long-term scheme that will replace the controversial Leap programme. | Sorrell has accepted a £150,000 pay cut, taking his salary to £1.15m, which will impact his potential bonus payouts and also share awards under a new long-term scheme that will replace the controversial Leap programme. |
| If he hits his performance targets, under his new remuneration deal Sorrell's bonus will drop from 250% of salary to 217.5% – a 22% fall proportionally. | If he hits his performance targets, under his new remuneration deal Sorrell's bonus will drop from 250% of salary to 217.5% – a 22% fall proportionally. |
| Hitting the top performance goals will see his maximum potential bonus payout, which is highly unlikely to be achieved, drop from 500% of salary to 435% of salary. This represents a 23% reduction. | Hitting the top performance goals will see his maximum potential bonus payout, which is highly unlikely to be achieved, drop from 500% of salary to 435% of salary. This represents a 23% reduction. |
| From this year his annual pension payment will drop from 45% of salary to 40% of salary. | From this year his annual pension payment will drop from 45% of salary to 40% of salary. |
| Jeffrey Rosen, the chair of WPP's remuneration committee, said that taking just Sorrell's salary and bonus there has been a 20% year-on-year fall. | Jeffrey Rosen, the chair of WPP's remuneration committee, said that taking just Sorrell's salary and bonus there has been a 20% year-on-year fall. |
| WPP's remuneration committee has been in discussions with irate investors for nearly a year since the rebellion at the 2012 AGM. | WPP's remuneration committee has been in discussions with irate investors for nearly a year since the rebellion at the 2012 AGM. |
| Shareholders will vote on Sorrell's pay, and the proposed overhaul, at WPP's 2013 AGM in London on 12 June. | Shareholders will vote on Sorrell's pay, and the proposed overhaul, at WPP's 2013 AGM in London on 12 June. |
| Arguably the biggest overhaul that investors will scrutinise is the replacement of the Leap scheme, which delivers on five-year performance targets. | Arguably the biggest overhaul that investors will scrutinise is the replacement of the Leap scheme, which delivers on five-year performance targets. |
| The existing scheme had a five-times-match facility linked to Sorrell's salary and bonus, which effectively meant he was able to invest between £3m and £4m in WPP shares and receive a 500% return five years later. | The existing scheme had a five-times-match facility linked to Sorrell's salary and bonus, which effectively meant he was able to invest between £3m and £4m in WPP shares and receive a 500% return five years later. |
| Leap was also based on the metric of total shareholder return, made up of share price appreciation and dividends. | Leap was also based on the metric of total shareholder return, made up of share price appreciation and dividends. |
| The new long-term incentive scheme will be based on a multiple of 9.74 times Sorrell's salary, potentially £11.1m based on his 2013 salary, and have more stringent "yardsticks" to appease investors. | The new long-term incentive scheme will be based on a multiple of 9.74 times Sorrell's salary, potentially £11.1m based on his 2013 salary, and have more stringent "yardsticks" to appease investors. |
| As well as total shareholder return, under the new scheme replacing Leap, WPP will have to hit a total of three targets, including earnings per share and return on equity, that will affect the size of the return Sorrell will get after five years. | As well as total shareholder return, under the new scheme replacing Leap, WPP will have to hit a total of three targets, including earnings per share and return on equity, that will affect the size of the return Sorrell will get after five years. |
| If he hits minimum threshold targets he will receive 20% of that £11.1m after five years, and up to 100% if all the more stretching yardsticks are all fulfilled. | If he hits minimum threshold targets he will receive 20% of that £11.1m after five years, and up to 100% if all the more stretching yardsticks are all fulfilled. |
| Catherine Howarth, chief executive of campaigning group ShareAction, said: "This year's remuneration plan at WPP demonstrates that directors' pay can indeed be hammered downwards when shareholders take a stand and vote 'no'. It took last year's humiliating defeat to shake some sense into the WPP board but the new proposals are a welcome win for shareholders who must keep the pressure up as they cast votes at AGMs in 2013." | Catherine Howarth, chief executive of campaigning group ShareAction, said: "This year's remuneration plan at WPP demonstrates that directors' pay can indeed be hammered downwards when shareholders take a stand and vote 'no'. It took last year's humiliating defeat to shake some sense into the WPP board but the new proposals are a welcome win for shareholders who must keep the pressure up as they cast votes at AGMs in 2013." |
| The company said that Rosen was stepping down from the remuneration committee to comply with corporate governance guidelines following nine years on the board. He will remain a non-executive director. | The company said that Rosen was stepping down from the remuneration committee to comply with corporate governance guidelines following nine years on the board. He will remain a non-executive director. |
| WPP is understood to be close to finding a replacement, who will not be from the company's existing board. | WPP is understood to be close to finding a replacement, who will not be from the company's existing board. |
| In a letter to shareholders Rosen said that cutting Sorrell's pay packet did not diminish his importance to WPP but that it was a necessary move given the public and shareholder backlash over executive remuneration. | In a letter to shareholders Rosen said that cutting Sorrell's pay packet did not diminish his importance to WPP but that it was a necessary move given the public and shareholder backlash over executive remuneration. |
| "The changes we have made were designed to be responsive to an environment in which moderation of executive compensation is considered necessary and appropriate," he said. "This reduction in no way reflects the committee's or the board's view of the importance of the chief executive to the company and its success and his unique mix of skills, and for which numerous share owners have expressed their appreciation." | "The changes we have made were designed to be responsive to an environment in which moderation of executive compensation is considered necessary and appropriate," he said. "This reduction in no way reflects the committee's or the board's view of the importance of the chief executive to the company and its success and his unique mix of skills, and for which numerous share owners have expressed their appreciation." |
| He added that the voting defeat at WPP's AGM last year was "disappointing" and that the remuneration committee's engagement with shareholders "fell short of the expectations of a majority of them". | He added that the voting defeat at WPP's AGM last year was "disappointing" and that the remuneration committee's engagement with shareholders "fell short of the expectations of a majority of them". |
| WPP chairman Philip Lader, the former US ambassador to the UK, said that twice a year the company discussed the "elephant in the room" – the potential replacement of the group's 68-year-old founder Sorrell – but said in the event this happens the aim will not be trying to "identify another Martin". | WPP chairman Philip Lader, the former US ambassador to the UK, said that twice a year the company discussed the "elephant in the room" – the potential replacement of the group's 68-year-old founder Sorrell – but said in the event this happens the aim will not be trying to "identify another Martin". |
| "Sir Martin, like all of us, is not immune from being hit by the proverbial bus," he said, in a letter to shareholders. "And someone having celebrated 68 birthdays, who has routinely worked 80+ hour weeks for 27 years, may one morning decide to start a new venture or even seek to discover what 'weekends' can be like. That 'elephant' has not been overlooked by your board." | "Sir Martin, like all of us, is not immune from being hit by the proverbial bus," he said, in a letter to shareholders. "And someone having celebrated 68 birthdays, who has routinely worked 80+ hour weeks for 27 years, may one morning decide to start a new venture or even seek to discover what 'weekends' can be like. That 'elephant' has not been overlooked by your board." |
| Unusually the terms of Sorrell's WPP contract state that he has the right to leave the company "at will", without a notice period. | Unusually the terms of Sorrell's WPP contract state that he has the right to leave the company "at will", without a notice period. |
| Lader, who heads WPP's nomination and governance committee, said that the process would be "part science, part art". | Lader, who heads WPP's nomination and governance committee, said that the process would be "part science, part art". |
| "The stakes will be high ... and we earnestly endeavour to remain prepared for this inevitable transition," said Lader, who was paid £425,000 by WPP last year. "That time, however, is not now. There's no 'elephant in the (WPP board) room." | "The stakes will be high ... and we earnestly endeavour to remain prepared for this inevitable transition," said Lader, who was paid £425,000 by WPP last year. "That time, however, is not now. There's no 'elephant in the (WPP board) room." |
| Like Rosen, Lader is stepping down from the remuneration committee in December. | Like Rosen, Lader is stepping down from the remuneration committee in December. |
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