WPP Chief Sorrell Survives Investor Revolt Over Pay Packageby
One-third of shareholders object to 70.4 million-pound award
Advertising chief defends WPP media-buying after criticism
A protest against WPP Plc Chief Executive Officer Martin Sorrell’s 70.4 million-pound ($102.5 million) pay package lost steam, with about 33 percent of shareholders of the world’s biggest advertising company giving it a thumbs-down.
Sorrell, Britain’s highest-paid CEO, has become the focus of investor concerns over U.K. executives’ pay during the current annual meeting season, in which a majority of shareholders of companies like BP Plc, Smith & Nephew Plc and Paysafe Group Plc have voted against remuneration arrangements.
Sorrell has plenty more to deal with -- the advertising industry is in a fight with its biggest clients over billing practices, and the U.K., where WPP is based, could leave the European Union in a vote later this month. Still, with the vote Wednesday on his 2015 compensation, Sorrell quelled the biggest protest against his pay since 2012.
Shareholder advisory groups like Hermes Equity Ownership Services Ltd., ShareSoc and the Local Authority Pension Fund Forum called for investors to oppose Sorrell’s pay, though Institutional Shareholder Services Inc. recommended supporting the package. A new plan is set to cap Sorrell’s total compensation, starting with his 2017 pay.
“The vote against Sorrell’s pay was stronger than I expected,” said Hans-Christoph Hirt, co-CEO of Hermes. “I felt WPP was listening today to questions voicing concern around the remuneration, but the proof will be in the pudding.”
Most of Sorrell’s payout was based on an incentive plan linked to meeting financial targets. WPP, whose agencies include Ogilvy & Mather and Young & Rubicam, says the amounts paid to Sorrell and other company executives reflect the superior returns generated for investors.
Sorrell defended his compensation, which rose from about 43 million pounds a year earlier, saying he keeps much of his wealth in WPP shares as a way to support a company that he has built over more than three decades.
“Over 31 years I’ve put cash into the company and I’ve committed shares,” Sorrell said in a meeting with journalists after the vote, which was non-binding. “This is not a cut-and-run, this is long term.”
The vote, at WPP’s annual general meeting, also follows a report this week revealing large ad agencies profiting from rebates they receive from advertisers, challenging the industry to make its practices more transparent.
A report commissioned by the New York-based Association of National Advertisers doesn’t name ad agencies or clients, but it throws a light on obscure practices in media buying, a source of high-margin profits for the industry.
Sorrell said Wednesday that the study was “one-sided” and did not include input from WPP and other advertising companies. The investigation did not single out any of the agency owners, but referred to media-buying practices generally.
The WPP chief also said the a U.K. vote to leave the EU in a June 23 referendum could have a serious impact on markets beyond the U.K., including Germany, Italy, France and Spain. He said WPP had “plans to deal with Brexit,” if the U.K. votes to quit.
A so-called Brexit could cost the U.K. 1 billion pounds ($1.45 billion) in lost advertising spending through 2030 because of a reduction in economic growth, media-buying agency ZenithOptimedia, which is owned by Publicis Group SA, said.