DUBLIN/LONDON (Reuters) - Investors in the world’s biggest advertising agency WPP rejected Chief Executive Martin Sorrell’s 6.8 million pound pay award, after he sought to defend a big rise unlike some other British bosses who have taken cuts.
Almost 60 percent of shareholders voted against WPP’s remuneration report at an annual meeting in Dublin on Wednesday, in the latest example of opposition to excessive boardroom pay that has been dubbed Britain’s “Shareholder Spring.”
The backlash has cost some executives such as Aviva boss Andrew Moss, and Sly Bailey, head of newspaper group Trinity Mirror, their jobs.
However Sorrell, who has built a business with 160,000 employees across 108 countries and has much of his personal wealth tied up in it, is expected to survive given that investors widely accept the success of his leadership.
Votes against remuneration reports are not binding but they can be deeply embarrassing for board members and critics hope they will add to pressure to give shareholders more control over executive pay.
“Ultimately, the market will decide. The shareholders have spoken, obviously we’re disappointed with the vote. We’re taking the result into consideration and the board will be consulting with shareholders and share owners again,” Sorrell said.
Business minister Vince Cable has spoken of “ludicrous” levels of executive pay that are “way out of line with performance” and is proposing to enhance the voting rights of investors, including introducing an annual binding vote on future remuneration policy.
A number of advisory groups and leading shareholders at WPP had criticised Sorrell’s pay deal because it far exceeds the scale of returns enjoyed by investors.
But Sorrell argued that he deserved his 60 percent pay rise last year given a track record that had seen him turn WPP into the world’s leading advertising group.
He has also noted that he has much of his personal wealth tied up in WPP in the form of a 1.4 percent stake worth over 130 million pounds and argued that his pay should be in line with CEOs at other major global media groups. John Wren, the chief executive of the world’s second-largest advertising group Omnicom was paid $15.4 million in 2011.
Sorrell’s pay rise comes after bosses at major British retailers Sainsbury and Tesco took pay cuts and follows shareholder revolts at Barclays, Inmarsat and Prudential.
Shares in WPP, which had been trading 1.4 percent lower ahead of the result, extended their losses to trade down 2.3 percent at 750.5 pence by 3.22 p.m and were underperforming a flat FTSE 100 bluechip index.
“The message from shareholders was unambiguous and cannot be ignored,” said Guy Jubb, Global Head of Governance & Stewardship at Standard Life Investments which is among WPP’s 10 biggest shareholders. “It is now in the compensation committee’s gift to reach out to WPP’s leading shareholders to address their concerns.”
WPP, which is expanding rapidly in faster-growing emerging markets with a steady stream of acquisitions, said on Wednesday that it had made a strong start to the year.
“2012 has started well with all geographies and sectors growing revenues,” Chairman Philip Lader told shareholders.
“Operating profit is above budget and last year and the increase in margin is in line with the group’s full-year margin target of 0.5 margin points improvement.”
Writing by by Paul Hoskins; Editing by Erica Billingham