By Ed Ballard
LONDON-- Martin Sorrell, the chief executive of U.K. advertising
group WPP PLC, stands to receive shares worth GBP36 million ($53
million) as part of his pay package this year, nearly 60% more than
he received the previous year.
The amount, which comes in addition to Mr. Sorrell's salary, is
the maximum allowable under a controversial pay plan approved by
shareholders in 2009 but replaced in 2013 following a shareholder
revolt. A new, less generous plan comes into effect from 2017.
WPP said on Monday that the payment was calculated based on
growth in market capitalization, shareholder returns, and "strong
outperformance" versus competitors.
"This senior management incentive compensation plan required
substantial personal, long-term investment by the participants,
exceptional corporate performance over five years, and was approved
by an 83% supporting vote of share owners," said WPP's Chairman
Philip Lader.
Over the five years through 2014, WPP's share price more than
doubled to GBP13.45, rising 121% compared with a 21% gain for
London's benchmark FTSE 100 index. WPP's stock also outperformed
its biggest competitors. Shares in Omnicom Group Inc. rose 98% in
the period, while Publicis Groupe SA's rose 109%.
The amount of Mr. Sorrell's compensation, which makes him one of
the best paid executives in the U.K., has previously riled
shareholders and the U.K. public. In 2012, a majority of WPP
shareholders voted against his pay hike for 2011, but last
year--when Mr. Sorrell received a share award worth GBP22.7 million
and GBP29.8 million in total pay--just 28% of shareholders voted
against or abstained.
Even for a high-ranking corporate executive, Mr. Sorrell earns a
lot. The average total compensation for a FTSE 100 executive jumped
50% to GBP2.82 million last year, according to Grant Thornton U.K.
LLP.
Mr. Sorrell has publicly defended his pay as a reward for
masterminding the acquisition spree that transformed a manufacturer
of shopping baskets into one of the world's biggest advertising
companies over the past 30 years.
Shortly before shareholders issued their rebuke in 2012, WPP's
CEO said the controversy was "deeply disturbing."
Mr. Sorrell's generous compensation comes as the level of pay
for senior executives has edged out mis-sold products as a leading
reason for the British public's lack of trust in companies,
according to a survey of 1,000 company directors in a recent report
by the Institute of Directors.
"It's an astonishing sum of money and it seems a bit excessive,"
said Luke Hildyard, deputy director of the High Pay Centre, a group
that lobbies for top-tier executive pay to be curtailed and
co-wrote the IoD's March 1 report.
"Clearly, he's led the company well and is a successful business
leader, but given the state of the wider economy it would be a
surprise if [WPP's] performance hadn't improved," Mr. Hildyard
said.
For others, Mr. Sorrell's record justifies his handsome
rewards.
"The question for investors is: Does Martin Sorrell add more
value than he takes out? In our view that would be a categorical
yes," said Ian Whittaker, Head of Research at brokerage house
Liberum Capital.
"He remains an integral part of WPP. If you look at the success
he's had aligning the company toward faster-growing markets and
digital, he has made the right moves, unlike some of his
peers."
WPP shares fell nearly 3% in 2014 but are up 16% so far this
year.
Write to Ed Ballard at ed.ballard@wsj.com
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