London briefing: Sorrell pay advertises sense of self-worth
Boss of advertising giant WPP gets his retaliation in early over £70m pay
Martin Sorrell: said he had spent more than three decades building WPP from a £1m company into one capitalised at £21bn
Martin Sorrell, the septuagenarian boss of advertising giant WPP, doesn’t like the word “pay”. Instead, it seems, he prefers the term “reward” to describe the lavish remuneration that will see him collect a pay package in the region of £70 million (€88.5m) for the past year.
Speaking at an industry gathering in London earlier this week, Sorrell defended his controversial “reward”. He was no “Johnny come lately” who had moved in at a company and turned it round for a big payday, but had spent more than three decades building WPP from a £1 million company into one capitalised at £21 billion.
The criticism – and there’s a growing chorus of it – would be justified “if it was one five-year plan and we buggered off”, he said. But he had taken “a significant degree of risk” in his 31 years building the business, he told his largely approving audience. “If there is a problem, it is that we have been successful. It’s pay – I don’t like the word pay, it is reward for performance with risk attached,” he said.
Lengthy tenureBut how much risk does a salaried chief executive really take, particularly one of as lengthy a tenure as Sorrell? They don’t have to remortgage their houses to finance a start-up, for example, and they’re guaranteed a basic salary (in Sorrell’s case, a little over £1 million a year).
It’s true that in the early years Sorrell took a huge gamble that he could transform the tiny Wire and Plastic Products business, which made shopping baskets for supermarkets, into a world-class advertising empire.
WPP is now the world’s largest advertising company and Sorrell is undoubtedly one of Britain’s most successful businessmen. He’s clearly a ferociously hard worker – but is he really worth £70 million?
The WPP boss clearly thinks he’s worth every penny and – unlike many chief executives who come under fire for excessive pay – he’s not afraid to say so. “If WPP does well, I do well”, he says.
It’s not the first time Sorrell has been forced to defend his huge pay package, which is largely the result of a controversial share award scheme that has pushed his total payout to more than £150 million since 2010. During the “shareholder spring” of 2012, almost 60 per cent of WPP shareholders voted against the group’s remuneration report in protest at Sorrell’s then relatively modest £6.8 million package.
It was the biggest bloody nose to be dealt to a company since 2009, when 90 per cent of shareholders in RBS refused to back the bank’s pay report because of anger over the huge pension for the disgraced Sir Fred Goodwin.
This year’s WPP shareholder meeting will not be held until June and Sorrell is getting his retaliation in early. But, as the annual meeting season gets into full swing, the omens for richly rewarded company bosses do not look good.
Many will recall that several high-profile chief executives were forced to resign as pay protests reached a peak four years ago, including David Brennan of AstraZeneca, Sly Bailey of Trinity Mirror and Andrew Moss of Aviva.
Last week, shareholders in two FTSE 100 companies staged significant rebellions, although there were no resignations. At BP, which suffered its biggest-ever loss last year, 59 per cent of investors voted against the £14 million pay deal for chief executive Bob Dudley. And 53 per cent of Smith & Nephew’s shareholders rejected the company’s decision to pay out management bonuses even though performance targets had not been met.
Nonbinding voteAs with BP, the Smith & Nephew vote was nonbinding, although both companies promised to review their pay policies in the light of shareholder disapproval.
Centrica, the owner of British Gas, also suffered a pay revolt at its meeting this week, although on a smaller scale. Some 15 per cent of shareholders objected to the £3 million pay package for chief executive Iain Conn. Other flashpoints in coming weeks look likely to include Reckitt Benckiser, whose chief executive Rakesh Kapoor saw his package virtually double to £23 million last year. Average annual pay for a boss of a blue- chip company is about £5 million.
Reckitt has form when it comes to lavish packages. Kapoor’s predecessor, Bart Becht, famously collected more than £90 million in 2009, which still holds the record as the biggest reward for a chief executive of a British public company.
Fiona Walsh is business editor of theguardian.com