Martin Sorrell

Sir Martin Sorrell will receive £36m from a controversial share plan this year, even though the scheme was dismantled in 2012 in response to investor anger.

The stock award for the chief executive of advertising group WPP mean he risks becoming a lightning rod for political criticism of executive pay in the run-up to the UK general election.

Sir Martin is the highest paid FTSE 100 chief executive, according to figures compiled by the High Pay Centre, and has been the subject of sizeable shareholder revolts over the past three years.

His total pay for last year will exceed £40m, although the exact figure will only be published at the end of April in WPP’s annual report — a week before polling day.

In a statement on Monday, WPP chairman Philip Lader said: “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 per cent supporting vote of share owners.

“The awards were determined by the arithmetic application of this 2009 plan and are aligned with the £12.8bn share owner value creation over this period derived from share price appreciation, dividends and share buybacks.”

Roger Barker, director of corporate governance at the IoD, said this month that executive pay was “likely to be an issue ahead of the general election”.

Investors also are expecting a number of disputes over pay this year at top London-listed companies, including at WPP, where 60 per cent of shareholders rejected the remuneration report in 2012 as part of the so-called shareholder spring.

Among the highest recently-announced pay packages for 2014 was €24.2m for Ben van Beurden, chief executive of Royal Dutch Shell.

Sir Martin’s £36m stock award results from WPP’s so-called leadership equity acquisition plan, where executives buy shares and then receive up to five times as many in addition, depending on performance.

He will receive the maximum possible share award under the plan in respect of last year, based on WPP’s total shareholder returns between 2010 and 2014.

Over that period, WPP returned 154 per cent, while rivals Publicis and Omnicom returned between 120 and 130 per cent.

All three groups have benefited from a cyclical improvement in advertising spending in recent years.

Although Sir Martin’s pay is decided on the basis of WPP’s performance against 12 of its peers, last year he still received a hefty £23m under the share plan even as Publicis had provided better shareholder returns over the period.

The plan was closed to new share purchases by executives in 2012. However, the plan is still able to award shares to executives in respect of 2015 and 2016, based on purchases they made in 2011 and 2012.

154%

WPP’s total shareholder returns between 2010 and 2014

Sir Martin could receive a maximum of 5.7m shares in relation to 2015 and 2016 — worth £88m at today’s prices.

Sixteen other WPP executives will also receive shares this year, including chief financial officer Paul Richardson, who is in line for shares worth £7.9m plus the proceeds of reinvesting dividends.

In the last two years nearly one-quarter of WPP’s shareholders have either voted against the company’s remuneration report or abstained.

Sir Martin wrote in 2012 that he found “the controversy over my compensation deeply disturbing”.

He plans to sell 48 per cent of the shares awarded to him under the plan this year, to cover the tax due.

Get alerts on WPP PLC when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article