WPP CEO Martin Sorrell saw his controversial 2014 pay deal – worth $65 million – approved by 77.7% of shareholders at the world's biggest agency company's annual general meeting in London today.
The package makes Mr. Sorrell the highest-paid chief executive of any public company in the U.K., according to an independent think tank, the High Pay Centre, which says he earns twice as much as the next highest earner, CEO Ben van Beurden at Royal Dutch Shell, who received $27 million last year.
Mr. Sorrell's 2014 package includes long and short-term bonuses and pension payments, on top of a $1.76 million salary. Last year, nearly 30% of investors refused to back his more modest $46 million award, but only 19.4% voted against this year's deal, with less than 3% abstaining.
However, it wasn't all plain sailing for Mr. Sorrell. Guy Jubb, the global head of governance and stewardship at Standard Life Investments (which he said owns 2% of WPP's shares) stood up during the Q&A session at the meeting to accuse the board of "Sorrell-centricity."
Mr. Jubb said, "WPP is more than just one individual. Its greatest asset is its 179,000 employees. We have been concerned for some time that Martin has dominated the decision-making process. It's not only about compensation, but also a lack of transparency on the succession element."
Roger Geary, a representative of ShareAction, addressed the board to denounce Mr. Sorrell's "astronomical" and "excessively large" pay, which he said posed a "significant risk" to WPP's reputation.
Mr. Lader defended the payout, saying that it was the result of a five-year investment plan that was approved by 83% of shareholders, and that the board had a contractual obligation to pay out the $65 million. He also pointed out that 92% of the money is based on performance.
On the "Sorrell-centricity" issue, while M.r Jubb supported Mr. Sorrell as the "right man to lead the company," he said that Roberto Quarta, who takes over from Philip Lader as chairman of WPP today, should make succession his "number one governance priority."
Mr. Lader made a great effort to demonstrate to the assembled shareholders and press just how seriously the board takes the search for an heir to Mr. Sorrell, who turned 70 in February. He said, "There is no more important decision the board has to make. For the last ten years we have had rigorous succession planning … At every board meeting we spend an hour focusing on management development and succession."
But Mr. Lader also pointed out a crucial hurdle in planning for a new CEO. With the fast pace of change in the industry, and Mr. Sorrell not showing any signs of slowing down, how can WPP have a successor lined up when it's impossible know what the company will look like in a few years' time? He said, "It's difficult to predict what skills would be required and who would be best qualified."
Another problem, according to Mr. Lader, is that to name potential successors might not help the co-operative spirit of the company, especially with WPP's much-vaunted horizontality requiring collaboration between so many senior executives across the group.
Non-executive director Jeffrey Rosen, who is also chairman of the remuneration committee, added, "For the ten years I've been on the board, succession has always been front of mind. It's a rigorous process that engages the entire board… but perhaps we have not articulated this as well as we could have done."
Mr. Lader also pointed out that the first 34 pages of the company's annual report consist of contributions from senior executives who run WPP's operating companies, in a rebuttal of Mr. Jubb's "Sorrell-centricity" accusation.
The meeting ended with a surprisingly emotional farewell, as Mr. Lader handed over the chairmanship of WPP to Mr. Quarta after nearly 15 years. He admitted he had "occasional difficulties with the chief executive," but insisted they had always been resolved in the shareholders' best interests. Mr. Sorrell put an arm around Mr. Lader as the board adjourned.
This year's meeting was held at an anonymous central London conference venue, a very different setting to last year, when WPP invited shareholders to enjoy magnificent views from the EU's tallest building, the Shard. The meeting is always well attended, and WPP provides a generous lunch for shareholders afterwards -- this year with the group's four Holding Company of the Year awards from the Cannes Lions International Festival of Creativity displayed prominently next to the egg sandwiches and strawberries.