WPP investors reject Sorrell pay plan

WPP chief exec Sir Martin Sorrell (left) has lost a shareholder vote over pay.

Story highlights

  • FTSE chief exec Martin Sorrell losing shareholder vote over pay
  • Sixty percent of WPP investors vote down company's remuneration report
  • Martin had been awarded a 60% rise in total remuneration to £6.8m in 2011
  • Since 1985 he transformed the company into the world's largest advertising group

Sir Martin Sorrell on Wednesday became the latest FTSE chief executive to lose a shareholder vote over pay after around 60 per cent of WPP investors voted down the marketing company's remuneration report.

Philip Lader, WPP's chairman, said at the annual meeting's conclusion that the board had exercised its "best judgement" given the company's performance last year.

"We take the remuneration report vote seriously," he said. "We'll consult with many share owners and we'll then move forward in the best interest of our share owners and our business."

Speaking to reporters after the meeting in Dublin, Mr Lader said it was "premature" to determine if Sir Martin's pay package would be changed to reflect the concerns.

Guy Jubb, global head of governance & stewardship at Standard Life Investments, which holds a 1.9 per cent stake in WPP, said: "The message from shareholders was unambiguous and cannot be ignored. It is now in the compensation committee's gift to reach out to WPP's leading shareholders to address their concerns and implement mutually acceptable pay policies and practices."

Sir Martin, who since 1985 has transformed the former shell company Wire and Plastic Products into the world's largest advertising group by revenues and market capitalisation, had been awarded a 60 per cent rise in total remuneration to £6.8m in 2011. His basic salary rose 30 per cent to £1.3m.

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Shareholders representing 59.5 per cent of WPP's shares voting in proxy rejected the company's remuneration report, with 40.5 per cent voting in favour, excluding a small portion who abstained.

Jeffrey Rosen, head of WPP's remuneration committee, saw 22 per cent of the proxy vote come out against his re-election as a director. Almost 12 per cent of the proxy voters opposed Mr Lader's re-election.

But Sir Martin himself received an overwhelming 98 per cent of proxy votes in favour of his board position.

A survey by Manifest, the proxy voting agency, and MM&K, a remuneration consultancy, this week found that the median total remuneration for FTSE 100 bosses, of which Sir Martin is one, rose by 10 per cent last year to £3.7m, with basic salaries rising 2.5 per cent.

Last month, several shareholder advisory groups, including ISS, the ABI and Pirc, recommended investors vote against the remuneration report. One top-20 shareholder, Scottish Widows Investment Partnership, said on Wednesday it voted against it because it "disagreed with the WPP remuneration committee's decision to change prior arrangements concerning executive pay".

Answering a question from a shareholder in Dublin, Mr Rosen said Sir Martin's compensation was set with the wider economic environment in mind and to "reflect the realities of an international competitive marketplace".

Mr Lader said that the board understood the "concern" but "remains committed to pay for performance", with a high degree of variability and requirement for "co-investment".

Writing in the Financial Times last week, Sir Martin defended the package as rewarding "performance, not failure", saying that he rarely sold shares and had "almost all of my net worth" tied up in the company.

Around 100 shareholders made the trip to Dublin for the meeting.

In his presentation, Sir Martin highlighted the growing return of cash to shareholders, with dividend payout ratio reaching around 35 per cent. He sought to address criticism of the company's long-term performance, showing compound annual growth rate in revenues of 35 per cent since 1985, with margins at a "historic high".

Last year, WPP's remuneration committee, led by Mr Rosen, had canvassed shareholders about a 50 per cent pay rise for Sir Martin, but lowering this to 30 per cent did little to quell investor anger at a time of greater activism over executive compensation in the UK.

Last year's annual meeting saw WPP investors holding more than 40 per cent of the company vote against its remuneration report.

"I would have thought that that would have alerted the board, in particular the remuneration committee, that there was significant shareholder disquiet about the way WPP formulated its remuneration packages," said Louise Rise, the single shareholder who asked a question in Dublin on Wednesday.

WPP's largest shareholders include BlackRock, Legal & General and T Rowe Price.

Such shareholder votes are not binding but the UK government has indicated that it may require companies to adhere to them by 2014.

Alongside the AGM, WPP also issued a trading update, saying it expected like-for-like revenue growth of "over 4 per cent" in 2012 with a "slightly stronger second half".

For the first four months of the year, WPP reported like-for-like revenues up 4.0 per cent to £3.2bn, with growth across all sectors but at lower levels than last year. May showed a "similar overall pattern to the first four months", Mr Lader said, WPP chairman, with the Middle East remaining the most challenging region so far this year. Growth in the Bric markets -- Brazil, Russia, India and China, which remain a key focus for WPP -- was more than 14 per cent on a like-for-like basis.

"We've had a very strong new business run, we've had a number of major new team assignments in the last four to six weeks, and we are making some progress in consumer insight although the euro crisis is becoming more concerning," Sir Martin said.

He told investors that WPP's strategy remained focused on new markets such as the Brics, new media, consumer insight and data analytics, and to make all WPP employees across its hundreds of agencies work in a "more integrated way for our clients".