MUMBAI: Global advertising giant WPP CEO Sir Martin Sorrell was in for a rude shock as 59.5 per cent shareholders voted
Wednesday against the proposed 60 per cent hike in his annual pay package at the company’s annual general meeting held in Dublin on 13 June.
The proposed hike would have increased Sorrell’s pay to ?6.8 million.
Sorrell’s proposed pay hike had been the topic of debate for the past week as many advisory groups and leading stockholders deemed that the new wage is not in sync with investor returns.
In his defence, Sorrell said that his role in transforming WPP into an advertising force in 108 countries justified the proposed pay packet of ?6.8 million. According to media reports, his pay package is made up of ? 1.3 million basic salary, ?2 million annual bonus, ?3 million deferred shares and other benefits.
WPP shares have risen more than 11 per cent this year and despite the on-going financial crisis, the company’s stocks are up over 21 per cent from 5 years ago.
Over the past year, a lot of companies have faced dissent over CEO’s pay and the shareholders’ views on it. Earlier in the month, British insurer Aviva CEO Andrew Moss was forced to step down after shareholders voted against his remuneration plans.
In 1985 Sorrell left Saatchi & Saatchi and bought 15 per cent stake in WPP with the intention of building a global advertising business. Over the years, he has continued to make personal investment in the company to the tune of an estimated ?40 million.
Sorrell‘s stake in the company is worth ?140 million, accounting for less than two per cent holding in modern-day WPP.
The disagreement by shareholders was not entirely unexpected as last year too, 41 per cent of them voted against his pay hike. Eventually, Sorrell managed to get a hike of 30 per cent and his maximum potential bonus was inflated as well.
In a related development, nearly 20 per cent plus shareholders voted against the re-election of three directors who are part of the pay committee - Jeffrey Rosen, head of the pay committee (21.8 per cent), and non-executives Ruigang Li (28.7 per cent) and Koichiro Naganuma (29.7 per cent).
Industry experts are of the opinion that such indicators of non-confidence in the company’s management may in the long run threaten shareholder’s distrust in the way the company is run.
