WPP To Cut Sorrell Pay After Investor Talks

By Mark Kleinman, City Editor

Sir Martin Sorrell, the chief executive of WPP Group, was paid a total of £17.6m in 2012, reflecting a jackpot reward for the marketing services provider's resurgent share price performance.

The package, which was disclosed in the company's annual report today, includes an £11.4m award from a long-term co-investment incentive plan that paid out for the period 2008-2012, and which was announced several weeks ago.

Sir Martin's package will cement him as one of the best-paid bosses in Britain's blue-chip share index in 2012, a year in which WPP made record profits and saw the company's share price reach an all-time high.

The payouts are, though, likely to spark opposition from some shareholders, who will be keen to digest the overhauled incentive structures on offer to Sir Martin and his senior executive colleagues.

The new proposals will see Sir Martin's target pay return to that of the period 2007-2010, a company spokesman said. Between 2011 and 2013, his potential total pay will have been reduced by a third, the spokesman said.

The WPP chief has agreed to a £150,000 cut to his annual salary of £1.3m, while the annual report shows that the company has also cut the prospective reward from short-term bonuses and axed a contentious long-term plan, known as LEAP. Pension contributions made to him by WPP are also being reduced.

Under the new schemes, Sir Martin will be eligible for a maximum annual bonus of £5m, down from £6.5m last year. He will also be eligible for a maximum long-term award of almost ten times his basic salary, equating to a total of roughly £50m every five years but equating to a reduction of 23% on the earlier scheme. The maximum would only pay out if WPP outperforms over a five-year period and delivered substantial returns to all shareholders.

The measures through which WPP's remuneration committee will determine future payouts to Sir Martin and colleagues are being tightened, with return on equity and earnings per share targets being added to the long-term plan.

At last year's annual meeting, approximately 60% of shareholders refused to back the remuneration report after Sir Martin received a near-£12m pay package in 2011. The figures just published show that his total remuneration rose 47% in the ensuing 12 months, although a spokesman said the new proposals reflected the consensus views which emerged from the consultation process.

As Sky News revealed last night, WPP is also recruiting a quartet of new non-executive board members in response to investors' requests for a refreshment of the board. Jeffrey Rosen, the non-executive director who chairs the remuneration committee, is stepping aside from that role after nearly nine years in accordance with corporate governance guidelines.

Mr Rosen and Philip Lader, WPP chairman, have led negotiations with shareholders who own roughly 40% of the company, and many of them are understood to have been broadly supportive of the outcome.

"The socialist in me asks what Martin is playing at, while the capitalist in me recognises that he has done a phenomenal job," one leading shareholder told Sky News today. "I'm afraid it's the capitalist that wins out."

As the owner of roughly 1.5% of WPP's shares, Sir Martin will also benefit from an anticipated increase in the company's dividend payout ratio.

The company also published data showing that over a 20-year period WPP has outperformed the FTSE 100 index on total returns to shareholders – comprising share price performance and dividends – by 8.4-to-one. It has also outperformed its major international competitors, such as Publicis of France by 1.8-to-one, and Omnicom of the US by 2.36-to-one, on this benchmark.

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