WPP Says It Has Succession Plan, But Gives No Details
WPP appears to be winning the battle over CEO Martin Sorrell's pay package, as 74% of shareholders voted in favor of his remuneration agreement at the group's annual general meeting today at London's Savoy Hotel, where the focus shifted to another issue, succession management.
WPP chairman Philip Lader, who will himself step down at the end of 2014, sought to reassure shareholders that a plan is in place to replace Mr. Sorrell, who is 68, when the time is right.
Speaking to reporters after the meeting, Mr. Sorrell referred to the hit-by-a-bus scenario that is shorthand for the sudden loss of a company's leader, saying, "We know what we'd do in the so-called 'red bus situation' and in the long term situation. Of course I'm involved. We take succession management very seriously in preparation for whatever might come."
Mr. Lader confirmed that internal and external candidates are constantly under review, and said that any appointment will depend on the needs of the group at the time a successor is required.
Mr. Sorrell, in self-deprecating mood, said, "It's up to the board to decide, but at some point I'll be taken to the woodshed and told I've done enough damage and it's time to go… Whoever succeeds me will do it differently and will probably do it better. WPP is in part my creation and any founder has a stronger emotional commitment. It's a different mentality to a manager, and the company is very different to when it started with just two people in 1985."
Asked whether he intends to be leading the company in ten years' time, Mr. Sorrell replied that it was an "impossible question to answer".
At the meeting, 74% of shareholders voted in favor of Mr. Sorrell's remuneration arrangements, compared to 60% last year. In April 2013 WPP disclosed that Mr. Sorrell would accept a cut to his $2.02 million 2012 base salary to $1.8 million this year, a drop in his maximum potential bonus, and replacement of WPP's controversial long-term incentive plan with a less generous one.
Mr. Sorrell received an almost unanimous vote of confidence from shareholders, with 99.98% declaring themselves in favor of him continuing as a member of the board of directors (they don't get to vote on his CEO role), up from 98.71% last year.
There was still an element of protest at the Savoy Hotel meeting, with two shareholders raising concerns about the way WPP is run. Deborah Gilshan of the RPMI, the investment arm of the railway workers' pension fund, said to the board of directors that she "cannot comprehend" the size of Mr. Sorrell's pay award and that succession planning measures "do not go far enough."
Jeffrey Rosen, the outgoing head of WPP's remuneration committee, replied, "We always tried to take full account of a diversity of views. The decisions made about Mr. Sorrell's long-term incentive plan were framed against this consultation process… The long-term incentive plan is more demanding in terms of performance criteria and the board felt this was an appropriate response to the consultation process."
Louise Rouse, director of engagement at activist shareholder group ShareAction, also questioned the level of Mr. Sorrell's pay and asked for reassurance from the board that it is "taking steps to be sensitive to the pay and conditions of low paid workers" and that it is paying the company's fair share of taxes.
Finance Director Paul Richardson said that ancillary services are outsourced, and that fair remuneration forms part of the decision as to which companies WPP uses. He also said that WPP's tax policy is "not aggressive" and that the company has a "very consistent" tax rate around the world.
WPP also released a trading update for the first four months of 2013, showing global revenues of $5.4 billion, with like-for-like revenues up 2.3% in the period. The strongest growth came from Asia Pacific, Latin America, Africa & the Middle East and Central and Eastern Europe at 6.8%. Western Europe and the U.S. were both down -0.3%.
Mr. Sorrell said that WPP agencies have won significant new business in North America, including Gillette the Nestlé media business, and pharmaceutical accounts, but he said, "I would like to see the U.S. stronger." The only way to achieve this, he said, is to "do better."