WPP’s Sorrell Steps Back in Pay Row Amid New U.K. Rules
WPP Plc (WPP) Chief Executive Officer Martin Sorrell, whose pay package was voted down by investors last week, said he will accept plans by U.K. Business Secretary Vince Cable to give shareholders binding votes on executive pay.
WPP is in talks with investors to alter Sorrell’s compensation structure, after a majority opposed to a 56 percent raise in a non-binding ballot, he said in an interview yesterday at the Cannes Lions conference in France. The 67-year-old is staying out of these discussions, he said.
Investor groups including ISS and Glass Lewis had urged shareholders to vote against the increase, saying Sorrell’s pay was too high compared with other U.K. executives. In a Financial Times column published before the vote, Sorrell argued that his remuneration should be compared with international rivals such as Omnicom Group Inc. (OMC)
“There hasn’t been a one-way reaction,” the CEO said yesterday. Taking into account the negative press his salary got and the reaction to his column, “there are people who said both articles were good.”
At the June 13 shareholder meeting, about 60 percent of investors voted against the proposed pay. Sorrell said that he isn’t contacting any shareholders himself during current discussions with investors, which he emphasized are not negotiations.
Publicly traded companies in the U.K. will have to give shareholders binding votes on executive-pay structures every three years, Cable told lawmakers yesterday.
“There is compelling evidence of a disconnect between pay and performance in large U.K.-listed companies,” Cable said in a statement to Parliament. “It is right that the government acts to address this clear market failure.”
Sorrell said he’ll accept whatever lawmakers decide.
Executives are losing many of their battles to keep raises and bonuses as European investors, hit by instability on the continent and burgeoning jobless rates, push back against what they see as inappropriately high pay levels. Last month, shareholders voted down insurer Aviva Plc (AV/)’s remuneration plans while staging protests at UBS AG (UBSN) and Inmarsat Plc for failing to keep compensation in line with stock performances.
The investor rebellion at WPP is one of the biggest since 2009, when 90 percent of Royal Bank of Scotland Group Plc shareholders turned down the pension plan for the lender’s former chief Fred Goodwin. Sorrell’s pay package, including long-term incentives, was worth 11.6 million pounds ($18 million) last year, making him the second-highest paid company head in Britain’s FTSE 100 Index where CEOs received a median compensation of 3.2 million pounds, according to remuneration researcher Manifest and MM&K.
“If Britain wants world champions in the private sector, we have to pay competitively,” Sorrell wrote in the column this month. “If the government or institutions believe pay is excessive, tax it. Do not fiddle with the market mechanism. WPP is not a failure, it is a success.”
WPP was little changed at 777 pence as of 8:20 a.m. in London. An investor in the company will have made a 15 percent return so far this year. That compares with a gain of less than 1 percent in the FTSE 100 Index.
Sorrell has built WPP into the largest advertising industry in the world since he took over Wire and Plastic Products in 1985. Much of the growth is through acquisitions, and the company has made more than two dozen so far this year, expanding into faster-growing markets in Asia and Latin America and into digital properties.
As part of the transaction, WPP is creating a new fund based in San Francisco that will help the agency work more closely on ad initiatives with Silicon Valley heavyweights such as Google Inc. (GOOG), Apple Inc. (AAPL) and Facebook Inc. (FB), Sorrell said.
AKQA CEO Tom Bedecarre will run the unit, which will draw funding from the 300 million pounds to 400 million pounds WPP spends on acquisitions annually.
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