(Adds Context News) (The author is a Reuters Breakingviews
columnist. The opinions expressed are his own)
By Chris Hughes
LONDON, June 13 (Reuters Breakingviews) - The market has
spoken. Almost 99 percent of WPP (WPP.L) shareholders want
Martin Sorrell to stay as the advertising group’s chief
executive and nearly 60 percent think he is overpaid. Sorrell is
a big shareholder too. He says his interest in the company
guides his behaviour as the firm’s top executive. If that’s
true, he will see the financial logic in performing a U-turn on
his vigorous defence of his 13-million-pound pay package in
Sorrell will this year receive a 1.3-million-pound base
salary and a total potential bonus of up to five times that,
plus other benefits. WPP points out that his counterparts at
U.S. media groups are entitled to maximum bonus awards at much
higher multiples of base pay. Moreover, it's true that Sorrell's
total remuneration is largely paid in WPP stock, which has to be
earned through performance.
WPP’s owners weren’t impressed with the justification.
Sorrell should pay attention, if only out of economic
self-interest. Since most of his personal wealth comes from his
WPP holdings, some awarded and some purchased, he will be better
off doing whatever it takes to make his fellow investors happy.
Right now that means scaling back or restructuring his pay.
The protest is probably about more than just pay. WPP’s
fortunes are unusually reliant on Sorrell himself. Many say he
provides the synergy among the empire’s sprawling units. But he
will not last forever and needs to show that he listens.
Investors have taken a calculated risk in firing a rocket at
Sorrell - he could decide to quit the company over it. The
stakes next year will be higher, with votes on pay set to become
binding in UK law from 2014. The protest was well flagged. The
board and Sorrell could create a lot of shareholder value with
an understanding response.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Shareholders in WPP voted 60:40 against approving the
advertising group's remuneration report, in protest at perceived
excess pay for Chief Executive Martin Sorrell.
- Jeffrey Rosen, the chair of the remuneration committee,
suffered a 22 percent vote against his re-election to the board.
- Sorrell’s re-appointment was approved by 98.2 percent of
- Philip Lader, the chairman, said: "Our Board exercised its
best judgment in the context of the Company's record year,
international competitors, and the executives' performance.
“We appreciate our share owners' support on the re-election
of all directors and all other resolutions, take the
Remuneration Report vote seriously, will consult with many share
owners, and will then move forward in the best interests of our
share owners and our business."
- Reuters: WPP shareholders reject Sorrell's $10.6 mln pay
- For previous columns by the author, Reuters customers can
click on [HUGHES/]
(Editing by Edward Hadas and Sarah Bailey)
Keywords: BREAKINGVIEWS WPP/
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