43 million reasons to oppose ! At WPP Standard Life points to the double risk of self-dealing and complacency

At the WPP’s annual meeting in London the highest European 2014 package for a CEO, some 43 million for Sir Martin Sorrell was finally voted with only 22% of No votes, comparing with no less than 60% last year…Unpredictable investors !

WPP scandals market with a “jackpot-paying” to Sir Sorrell, of £ 36 million received from highly contested LEAP co-investment plan, bringing the total reported remuneration up to £ 43 million, or 37 times his salary. In 2015, the LEAP scheme participants have earned a share match of five times the number of shares they pledged in 2010. According to the press release published in March 2015, the maximum performance outcome results in the vesting of 2,326,945 shares for Sir Martin Sorrell, CEO, which would have been worth £ 16.86 million at the grant price in 2010 of £ 7.25 per share and which have more than doubled in value to £ 36.04 million at the vesting price of £ 15.49 per share on 13 March 2015.

During recent years, ECGS has noted significant opposition by shareholders to the remuneration report and the remuneration policy with 28.1% of shareholders voting against the report in 2014, 26.7% voting against the policy and an all-time low of almost 60% opposing the report in 2012.

With only 22.3% opposing the remuneration paid to the CEO (77.7% for) it would seem that shareholders have lost hope in ever seeing a reasonable remuneration at WPP and considering that £ 274,000 of his £ 453,000 benefits were expenses for his wife to accompany him on business trips:

ECGS does not blame them.

We are just sorry to note no intention to make significant changes in the coming years. Martin Sorrell makes no apologies as he believes being worth all of it, stating “For failure, fine, I would agree [that the figure is high] but this is about performance,” and “On this issue of my pay, 90pc of it was dependent on the success of the company.”

ECGS estimates that:

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The total fixed remuneration (£ 1.15 million base salary) and annual bonus received this year total £ 6.481 million.

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This year, the total received remuneration is valued at £ 32,199,500 (LEAP III vesting at £ 22.67 million), which is higher than the one most contested, in 2012.

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The remuneration granted to Martin Sorrell for the year under review is expected to amount to £ 17,517,237.

Our research partner Manifest gave them an Executive Remuneration Assessment grade of “E”.

But a friend of Proxinvest and a  one of WPP’s top shareholders, Guy Jubb, head of governance at Standard Life, criticised at WPP’s annual meeting in London the advertising group’s “lack of transparency” over how it intends to replace Sir Martin Sorrell, its founder and chief executive.

“We have been concerned for some time by the perception that Sir Martin has the potential to dominate the Board’s decision taking.”

He said that while he believed Sir Martin is the right person to lead the company, he was concerned by Sir Martin’s £43m pay package, the largest chief executive pay, and the company’s “Sorrell-centricity”.

He called for Roberto Quarta, the incoming chairman of WPP, “to not only acknowledge that managing the succession elephant will be his number one governance priority, but also commit to ensure share owners are given a clear and concise explanation by this time next year on how the board is doing so”.

Philip Lader, WPP’s outgoing chairman, said WPP had decided not to name potential successors to Sir Martin because doing so would be detrimental to the “co-operative spirit” within the company.

Standard Life here opens the debate pointing the relationship between egregious pay and complacency at the Board taking the succession issue as a serious issue, this  while UK regulators and the Financial Reporting Council, take a closer look at the risks that companies face from failing to plan for the sudden departure of a chief executive.

 Posted on 10 June 2015 by Proxinvest