WPP is standing firm in the wake of a possible shareholder revolt against CEO Martin Sorrell's $20 million pay package.
Institutional Shareholders Services, a powerful group that advises more than 1,700 clients around the world on governance risk for shareholders, is advising clients to vote against Mr. Sorrell's 2011 pay deal at the WPP annual general meeting June 13.
The ISS report criticises the "low level of transparency in the remuneration report" and the "substantial enhancement" of Mr. Sorrell's pay package.
A story in the Financial Times predicts that around 50% of shareholders could vote against the package, but WPP is defending its position. In a statement, WPP said, "The compensation committee is satisfied that compensation arrangements for the CEO are aligned with shareholders' interests, being 86% performance related with no reward for failure, no contract, and being globally competitive reflecting WPP's position as the global leader in its sector."
Jeffrey Rosen, chairman of WPP's remuneration committee, is also the New York-based managing director of investment bank Lazard. He has already scaled down the rise in Mr. Sorrell's base salary to 30% from 50%, which would make it $2 million. The base salary is not excessive, but the problem is with the fact that his bonuses depend on the base salary -- the maximum bonus has been raised to 500% from 300% of the base.
Mr. Sorrell's proposed earnings are not out of sync with his peers. Omnicom CEO John Wren's remuneration went up to $15.4 million in 2011 from $10.8 million in 2010, and Interpublic CEO Michael Roth boosted his to $13 million in 2011 from 10.2 million in 2010.
But the British are in the midst of a "shareholder spring" that has seen shareholders -- led by institutional investors -- reject remuneration reports at a number of leading companies. Insurer Aviva and pharmaceuticals company AstraZeneca both had their CEOs toppled after recent shareholder pay revolts.
Mr. Sorrell is not in danger of losing his position at the world's largest communications group, which he founded in 1985, and continues to manage very actively.
The WPP statement added, "We are disappointed that ISS has chosen to view the remuneration report domestically with no regard to the global market in which WPP operates."