More in Sorrell than in anger

Ever since the first revolts erupted in earnest this year, the “shareholder spring” has been searching for its own Hosni Mubarak to rally against. Now a suitably pharaonic candidate has emerged in Sir Martin Sorrell, the highly-paid chief executive of the advertising group WPP.

While many bosses have pusillanimously hunkered down in the face of investor anger, reluctantly shedding the odd bonus or percentage point of a pay rise to appease the seething mob, Sir Martin has chosen boldly to defy it. Today at WPP’s annual meeting, when investors cast their purely advisory votes on his £6.8m pay package, he will discover whether his demands have been accepted.

Much of Sir Martin’s case, which he laid out in the Financial Times last week, was familiar enough: his pay, while admittedly high in absolute terms, was both a reward for stock market success and modest in comparison with that paid to bosses at WPP’s global peers, such as Publicis of France and America’s Omnicom It has been called the L’Oreal argument: basically, this states he’s worth it.

More interestingly, however, Sir Martin also appeared to assert that it was not possible for him to go against the shareholders’ interest because of his own holding. “I now have a stake worth £140m, which represents less than 2 per cent of the company, and almost all of my net worth, which almost all advise me is extremely risky,” he observed.

As an advertising boss, Sir Martin presumably thinks highly of his own powers of persuasion. He has reason to do so. He recently forced the British government to recast its corporate tax policy by noisily relocating WPP’s corporate base to Ireland and refusing to return until the Chancellor of the Exchequer capitulated. But what happens if the shareholders prove more resistant to his arguments?

Technically, of course, the answer is “not much”. Sir Martin has picked his fight at a time when the government has yet to legislate to make pay votes compulsory, so neither his position nor his moolah are in any legal jeopardy. But this ignores the vital question of dignity: the sudden loss of face can be fatal for any patriarch.

If Sir Martin doubts the gravity of the situation, he should perhaps heed the words of Ivan Glasenberg. Glencore’s chief executive thinks that the position is very clear: if Sir Martin loses the vote, he should go. “If I was him, to be honest, and my shareholders voted down my salary because they didn’t think I was worth it, I think you’ve got to leave,” Mr Glasenberg helpfully observed at a mining dinner just the other day.

In Mr Glasenberg’s own case, of course, such a humiliation is a happily remote contingency. As he and his fellow executives effectively control the commodities trading company, they are in the agreeable position of being able to distribute the rewards without consulting so much as the office cat, let alone outside investors, if they choose.

Notebook, for what it’s worth, does not share Mr Glasenberg’s hardline view that a “no” vote on pay is the same as a P45. But this does not mean that such votes should be ignored by the board. Some response is called for – ideally the re-jigging of the chief executive’s package to shear it of whatever elements that investors find most unpalatable. If Mr Sorrell’s pay gets the thumbs down, this is what he should do. It is implausible to claim, as some do, that this will stop decent candidates from wanting to run public companies.

Mr Sorrell has not reigned for quite as long as the three decades Mr Mubarak managed. He assumed power in 1985 when he bought a controlling stake in what was then called Wire & Plastic Products, a small listed manufacturer of supermarket baskets. But this column doubts that he will be leaving soon, for all the “back me or sack me” dog whistles that have accompanied his pay counter-attack.

One reason is that Sir Martin has made WPP his life’s work, and he is actually fairly good at running it. The second is that near 2 per cent stake in the company. Would he really want, in what would be a fit of pique, to entrust almost his entire net worth to a successor?

This, of course, raises other issues for shareholders, such as who will take over when Sir Martin finally hangs up his bow tie and glasses, and whether he will accept it when the time finally comes to leave the stage. When they have sorted out the question of Sir Martin’s pay, investors may want to iron out these questions, too.