WPP's Sorrell to take on rebels as pay row rolls on
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WPP's Sorrell to take on rebels as pay row rolls on

www.reuters.com   | 11.06.2012.

LONDON (Reuters) - The row between investors and British companies over soaring executive pay will embroil one of Britain's most high profile businessmen on Wednesday when WPP chief Martin Sorrell appears at a vote to approve his 60 percent pay rise.
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A number of advisory groups and leading shareholders at the advertising group say they will vote against the proposed increase for the chief executive because it is out of sync with the returns made to investors.

Sorrell, who founded WPP in 1985 and has grown it by encouraging companies to place their advertising with his firm, is now facing one of his biggest challenges to persuade shareholders to focus on his performance and not the wider pay issue.

Far from shirking the fight, Sorrell has argued that he deserves his 6.8 million pound ($10.48 million) pay for turning WPP into the world's leading advertising group with more than 160,000 employees across 108 countries.

The backlash against executive pay, he says, stems from an earlier controversy over the level of pay awarded to bankers who have been blamed for the financial crisis. And his salary should be compared to the pay of his rivals in the United States and elsewhere, rather than British ad groups which are much smaller.

Nevertheless, a sizeable chunk of WPP shareholders look set to make the company the latest battleground in Britain's so-called 'Shareholder Spring' that has seen investors disgruntled by flatlining or falling share prices vent their anger by voting against executive pay deals.

"We're not nervous about giving people serious amounts of money, we're just very concerned that it has to be aligned to the owners of the business. We'll vote against it because it's not aligned with us," said one top 20 WPP shareholder.

Another British shareholder agreed he had no objection to high pay if investors also benefit.

"There are too many complex systems of reward which mean management is able to pay themselves for relative performance designed by themselves and their consultants but the only thing that matters to our customers, the pensioners and savers, is whether or not they are doing better," the second shareholder said.

"We have absolutely nothing against management becoming filthy rich as long as shareholders do equally well."

Shareholder advisory service Pirc has recommended members vote against WPP's remuneration package citing concerns about its "excessiveness" while the Association of British Insurers has highlighted its concerns by allocating it a "red top".

RAPID GROWTH

WPP has defended its actions by saying Sorrell's pay is performance related and reflects the fact the group has positioned itself well in recent years, growing rapidly in emerging markets and through digital marketing while the mature markets of the U.S. and Europe struggled.

Chairman Philip Lader sounded a more conciliatory tone in comments in the Sunday newspapers and said the group would await the vote and then discuss the issue with shareholders.

The vote at the Annual General Meeting in Dublin on Wednesday is non-binding and will not force WPP to reset its pay policy for 2011, but a large vote against Sorrell could result in a rethink for future years.

WPP posted full-year results in March showing reported profit before tax up 18.5 percent to over 1 billion pounds for the first time.

With the solid performance continuing into the first quarter, shares in WPP are up 14 percent since the start of the year, compared with the FTSE 100 .FTSE which is down 2.5 percent.

"WPP believes in rewarding performance and the CEO's compensation is 85 percent performance related," chairman of the compensation committee Jeffrey Rosen said in a statement. "We believe this gives an overall package wholly aligned with shareowners."

Five companies have already been hit by investor revolts at shareholder meetings this year, with Andrew Moss, the chief executive of British insurer Aviva (AV.L), stepping down after shareholders voted against his remuneration plans.

But few expect Sorrell to walk away.

"If it's voted down there will be a huge sulk ... but he's not going anywhere. WPP is his life. He will stay for the benefit of the company," the first shareholder said.

Analysts said Sorrell was well regarded by investors and deserved to be paid on a par with U.S. rivals, but they said the 60 percent rise had come at a bad time with the issue of executive pay so prominent.

John Wren, the chief executive of the world's second largest ad group Omnicom (OMC.N), was paid $15.4 million in 2011.

($1 = 0.6486 British pounds)

(Editing by Jon Loades-Carter)



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