Majority of WPP shareholders oppose executive pay deal

Sir Martin Sorrell Sir Martin founded WPP in 1985; it is now the world's biggest advertising group

WPP shareholders have voted against the company's executive pay report, which includes a £6.8m deal for chief executive Sir Martin Sorrell, by a majority of 59.5%.

The vote was announced at the advertising agency's annual general meeting in Dublin, but is not binding.

It comes after a number of shareholder advisory bodies urged members to vote against the deal.

WPP is the latest firm to suffer investor discontent over executive pay.

The voting result so far is based on the postal votes of WPP's large institutional shareholders.

Small shareholders attending the AGM in person are now voting at present, but this will have only a very limited effect on the final result.

At the scene

Sir Martin Sorrell upped the ante in the debate over his pay by publicly defending it on the basis that his performance merited such a generous package.

So the annual meeting took place in the context of this huge row with the company's shareholders.

But in Dublin's Convention Centre you would have been forgiven for missing this context had you not read the financial press in recent days.

In his presentation Sir Martin never once mentioned the "P" issue, but did a not-so-subtle job of justifying his pay nonetheless with a convincing argument about WPP's performance.

There were no fireworks from the floor. The only shareholder to ask a question politely inquired if the board had simply ignored warnings from last year's shareholder vote.

The answer from the man who authorised the pay rise suggested an element of contrition - the board promised to keep in continuous engagement with shareholders going forward.

The message from shareholders was received. There's no backtracking but it appears the board will try to avoid a similar row next year.

'More engagement'

Shareholder advisory body Pirc was one organisation that urged members to vote against the deal, citing concerns over its "excessiveness".

Pirc and other bodies highlighted the fact that Sir Martin's pay package was 60% higher than a year earlier.

The BBC's Northern Ireland business correspondent, Jim Fitzpatrick, who was at WPP's AGM, said its shareholders had "delivered a message".

He added: "The company justified their remuneration policies but struck a contrite note by promising a more 'continuous' engagement with shareholders."

Louise Rouse, director of engagement at investment campaigner FairPensions, who also attended the meeting, said: "It is difficult to know whether the WPP board underestimated the level of shareholder anger or simply chose to ignore it."

However, WPP's chairman Philip Lader, told the AGM that the company took the remuneration report vote "very seriously".

He added: "We'll consult with many share owners and will then move forward in the best interests of our share owners and our business."

However, BBC business editor Robert Peston believes WPP's board may need to take more drastic action to restore good relations with shareholders: "Normally in these embarrassing circumstances, someone senior would resign from the board, to bring about a structural improvement in the relationship with the owners."

Start Quote

Normally in these embarrassing circumstances someone senior would resign from the board”

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But he thinks that Sir Martin is unlikely to go: "Presumably it will have to be one or both of the individuals who set his pay, Mr Rosen and Mr Lader."

'Reward performance'

Ahead of the AGM, Sir Martin had defended his pay deal, which comprises a £1.3m salary, a £2m annual bonus and £3m in deferred shares and other benefits.

Sir Martin, who founded WPP in 1985, pointed to the company's £1bn record profit last year, and said he found the controversy over his compensation "deeply disturbing".

Writing in the Financial Times last week Sir Martin said: "WPP has a very independently-minded board and compensation committee, which makes decisions that they believe are in the long-term interests of the company and its shareholders, of which I am one.

"The board's compensation decisions are right because they reward performance, not failure, reject options in favour of a long-term incentive scheme with co-investment and five-year performance periods, and are competitively fair against our big US and French competitors, which we consistently outperform."

Others companies who have also recently faced shareholder rebellions include Aviva, Trinity Mirror and AstraZeneca - all of whom announced the departures of their chief executives as a result of investor pressure.

Recent shareholder discontent

Company Action Share price change in past year
Protestor at Barclays AGM

Barclays

In April, 32% of shareholders voted against the bank's pay plans, while 24% failed to back remuneration committee head Alison Carnworth.

-30%

William Hill

Willliam Hill

Almost half - 49.9% - of votes were against the pay package for chief executive Ralph Topping.

+20%

Glencore boss and Xstrata board member Ivan Glasenberg

Xstrata

About 40% of shareholders did not support the miner's annual pay report, while many opposed the re-election of two directors, including Glencore boss and Xstrata board member Ivan Glasenberg18432084.

-25%

Premier Food chief executive Michael Clarke

Premier Foods

More than 30% of shareholders voted against the company's remuneration report, which included a large "golden hello" to chief executive Michael Clarke.

-30%

David Brennan

AstraZeneca

Chief executive David Brennan announced his resignation after shareholders expressed concerns about the drug giant's performance.

-15%

Sly Bailey

Trinity Mirror

Chief executive Sly Bailey announced she was stepping down amid controversy over her pay. Almost half of shareholders later voted against the firm's pay plans.

-40%

Andrew Moss

Aviva

Chief executive Andrew Moss left the company one week after shareholders voted to keep him as boss but voted against his pay package.

-35%

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