WPP Investors Vote Down Pay Report
06/13/2012| 12:55pm US/Eastern
-- Nearly 60% of investors vote against pay report
-- Anger centered on CEO Martin Sorrell's nearly GBP6.8M pay deal
-- Protest votes lodged against chairman, remuneration committee chairman
-- Company promises to take shareholder vote "seriously"
DUBLIN--Nearly 60% of investors in advertising giant WPP PLC (>> WPP PLC) voted against the company's pay report at an investor meeting Wednesday, lodging another protest vote against high executive pay.
WPP said Wednesday 59.5% of investors in the company voted against the company's remuneration report at the company's annual meeting, based on the results of proxy votes read out at the meeting.
Investors had been angered in the run-up to the meeting in particular by a nearly GBP6.8 million pay package awarded during 2011 to the company's long-standing Chief Executive, Martin Sorrell.
Alongside the protest vote against the remuneration report itself, investors also marked their discontent with a nearly 12% vote against the re-election of WPP's Chairman, Philip Lader, and a nearly 22% vote against the re-election of the chairman of the remuneration committee, Jeffrey Rosen
Despite the anger over the size of his pay, Sorrell -- who founded WPP almost 30 years ago -- was given a vote of confidence in his leadership, with less than 2% of investors voting to reject his re-election.
Investor votes on executive pay are not binding in the U.K., although the government is consulting on plans to give shareholders a greater say in pay policies.
Mr. Sorrell was awarded GBP6.77 million in total annual remuneration in 2011, up 60% from the GBP4.23 million he received the prior year. The WPP boss made GBP12.96 million last year, when including compensation he earned over previous years but received in 2011.
The stand-off between WPP, the world's largest advertising company by revenue, and its shareholders, comes amid a broader wave of investor angst over executive pay in the U.K. that has claimed the jobs of three FTSE chief executives in the past six weeks.
Andrew Moss, the Chief Executive of insurer Aviva PLC, (AV.LN) David Brennan, the Chief Executive of AstraZeneca PLC (>> AstraZeneca plc) and Sly Bailey, the Chief Executive of Trinity Mirror PLC (>> Trinity Mirror plc) all quit amid investor fury over their remuneration.
U.K. shareholder bodies including the Association of British Insurers, which represents roughly 17% of FTSE companies, and Institutional Shareholder Services, or ISS, an international shareholder advisory firm, raised concerns about WPP's remuneration report ahead of Wednesday's investor meeting, citing issues around the wide jump in Mr. Sorrell's pay, his bonus awards and pension-related pay.
Speaking after the results of the proxy votes were read out, Chairman Mr. Lader struck a note of contrition, telling reporters WPP's board would "take the vote seriously, promptly consulting with many shareholders.. and will move forward in the best interests of the company and its shareholders."
Mr. Lader declined to be more specific on what the company planned to do and over what period, but defended Mr. Sorrell, who, he pointed out, has given "three decades of 24/7 commitment to this company."
Mr. Sorrell has responded robustly to criticism of his pay. Last week in an op-ed published last week in the U.K.'s Financial Times, he denied deserving a "bloody nose" for behaving as an owner instead of a highly-paid manager. "If that is so, mea culpa," Sorrell wrote. "I thought that was the object of the exercise, to behave like an owner and entrepreneur and not a bureaucrat."
Speaking at the investor meeting Wednesday, Sorrell said he was "disappointed" by the result, but noted: "the shareholders have spoken."
In particular he criticized ISS, saying he believes WPP's pay policies should be benchmarked with peer advertising groups in France and the U.S., not just other British or FTSE companies.
"In the case of WPP, we did take into consideration international comparators," Georgina Marshall, European Head of Research at ISS, said in a statement. "However, our vote recommendation against the remuneration report was not based on benchmarking comparators but on the large pay increase of 60 per cent."
Dublin-based WPP's competitors include Publicis Groupe SA (>> PUBLICIS GROUPE SA), owner of agency Saatchi & Saatchi, and Omnicom Group Inc. (OMC), the parent company of agencies such as TBWA and Japanese advertising group Dentsu (4324.TO)
Maurice Levy, Chairman and Chief Executive of Publicis, received EUR3.6 million in total gross compensation in 2011, up from EUR900,000 the previous year. But Mr. Levy's pay caused controversy in France when Publicis announced earlier this year that he would receive EUR 16.2 million in delayed bonuses in the coming months, rewards tied to his work from 2003 to 2011. A French government spokeswoman called the sum "disproportionate" at a time when executives should be showing moderation.
John D. Wren, Omnicom's president and chief executive, meanwhile, received USD15.42 million in total compensation in 2011, a 43% jump from the prior year, according to company filings.
Sorrell's career is more closely tied to his company than that of most other FTSE CEOs because he is WPP's founder. He purchased a shell company called Wire & Plastic Products in 1985 and transformed it into a beachhead in the global advertising market.
WPP, which is headquartered in Ireland although it trades on the blue chip U.K. FTSE 100 index, owns iconic advertising firms including JWT and Young & Rubicam, alongside media planning agencies Mindshare and Mediacom.
The company posted a 43% hike in net profit for 2011 to GBP834 million, on revenue up 7.4% to GBP10.2 billion and has flagged expectations of a strong performance for 2012, driven by advertising around major events such as the London-based Olympic Games and the U.S. presidential election.
Many investors, however, are in no mood to accept another large pay hike for Sorrell amid the current climate, and particularly after last year, when around 40% of the company's shareholders rejected the remuneration report, citing Sorrell's pay and that of his digital chief, Mark Read.
Write to Jessica Hodgson at firstname.lastname@example.org