WPP CEO Sorrell Faces a Huge Pay Cut Following CriticismBy and
Long-term bonus down more than 75 percent to 10 million pounds
Investors have cited pay and succession planning as concerns
WPP Plc’s Martin Sorrell, chief executive officer of the world’s largest advertising company, faces a huge cut in his pay package following investor criticism and a dismal year.
Sorrell will receive a long-term bonus of 10 million pounds ($14 million) compared with 41.6 million pounds a year earlier, the company said in a filing on Wednesday.
Sorrell’s total pay, which won’t be revealed until April, will also include pension payments, benefits, his salary and a short-term bonus. The so-far undisclosed payments last year amounted to about 6.4 million pounds, said a person familiar with the matter, who asked not to be identified because the figures are confidential.
WPP has lost almost a third of its market value over the past 12 months, with advertising industry headwinds taking a smaller toll on Publicis Groupe SA and Omnicom Group Inc. Major clients like Unilever Plc and Procter & Gamble Co. have been cutting marketing costs under pressure from activist investors, while companies disrupted by new technologies have been shaving their advertising budgets.
WPP’s shares declined 8.2 percent on March 1 when the company reported its worst annual performance since the financial crisis and gave a bleak outlook for 2018. The shares on Wednesday touched their lowest since 2014, and traded down 0.2 percent at 11.57 pounds at 4:05 p.m. in London.
The pay cut is mostly due to the phasing out of the company’s notoriously generous long-term incentive plan, the Leadership Equity Acquisition Plan, which rewarded the 73-year-old chief handsomely. This year is the first year of a new, less lucrative long-term incentive program called the Executive Performance Share Plan.
Richard Oldworth, a spokesman for London-based WPP, said he didn’t yet know the full details of Sorrell’s compensation but acknowledged the total would be less.
“The new scheme provides a much lower opportunity than the previous LEAP scheme,” he said. “Since it covers a five-year period, the weakness of the share price in 2017 will adversely affect the outcome.”
Last year, more than 20 percent of investors voted against WPP’s compensation, resulting in it being listed in a new public register set up by the Investment Association. Hermes, a WPP investor that voted against the remuneration report, also urged the company to focus on “the management succession risks” ahead of Sorrell’s eventual departure.
“The fact that he can register what looks like a massive drop and still collect a massive number shows there was something wrong with the original plan,” says Stefan Stern, director of the High Pay Centre, a U.K. think tank focused on pay.
Even without the cut, Sorrell would have been upstaged in the U.K.’s pay stakes by Jeff Fairburn, CEO of homebuilder Persimmons Plc, who is set for a total bonus award of around 100 million pounds, with 40 million pounds due this year. Fairburn says he will give a proportion to charity.