WPP Cuts Stock Payment to Chief -- WSJ
March 15 2018 - 2:02AM
Dow Jones News
By Nick Kostov
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 15, 2018).
The flagging performance of WPP PLC, the world's biggest ad
agency, is eating into the pay of one of the industry's best paid
executives.
On Wednesday, WPP disclosed that Chief Executive Officer Martin
Sorrell received GBP10 million ($14 million) in company shares as
compensation for 2017, a significant drop from the GBP41.6 million
in shares that Mr. Sorrell was awarded a year prior.
The payment is the first time Mr. Sorrell has been compensated
under a five-year remuneration program that began in 2013 when
WPP's board instated a cap on his pay in response to investor anger
over executive salaries. The program, which is linked to company
financial targets and share-price performance, rewarded Mr. Sorrell
73% of the total shares he would have received if the executive had
hit all of his targets.
Mr. CEO's total pay package -- including his salary, a
short-term bonus, pension payments and other benefits -- won't be
known until WPP publishes its annual report next month.
Mr. Sorrell, long regarded as an oracle of the ad-industry, is
coming under investor scrutiny as his empire of agencies -- from
Grey and Ogilvy & Mather to Young & Rubicam -- strains
under the force of digital disruption. The 73 year-old executive is
grappling with clients who are turning away from traditional
Madison Avenue campaigns for print and TV in favor of technologies
that target consumers as they surf the internet.
WPP's share price has dropped by almost a third over the past
year as Mr. Sorrell has wrestled with the loss of lucrative
accounts. Consumer-goods giants and other companies are redirecting
spending they once lavished on ad agency-led campaigns toward tech
companies like Facebook Inc., or handling aspects of media-buying
or production in-house.
Earlier this month, WPP shares dropped sharply after it logged
its worst annual performance since the financial crisis and
forecast no growth for 2018.
"His pay has now come down by a lot two years in a row, and it's
still so large. It shows you how massive it was," said Stefan
Stern, director of the U.K.'s High Pay Centre, an independent think
tank in London
WPP said its shares rose 51% over the five-year period covered
by the compensation program, outpacing the broader FTSE 100 index
that rose 30% during the period.
Under WPP's previous incentive program, Mr. Sorrell received
almost GBP210 million in compensation between 2012 and 2016,
leading to run-ins with investors who argued the amount was
exorbitant.
In 2013, shareholders voted to cap his compensation at 9.74
times his salary, a total of about GBP20 million. In June,
shareholders decided to lower the cap to six times his salary,
starting in 2021.
Investors who say the firm hasn't gone far enough in reducing
Mr. Sorrell's pay have begun questioning whether WPP should do more
to plan his succession -- a delicate issue at a company that Mr.
Sorrell built from the ground up.
"The question for investors is how the business will look when
he inevitably retires," Ashley Hamilton Claxton, Royal London Asset
Management's corporate governance manager, said in June after
voting against Mr. Sorrell's compensation plan, which she
considered to still be excessive.
Mr. Sorrell, who has led WPP for more than 30 years, has said he
deserves the pay packages for masterminding an acquisition spree
that helped transform a manufacturer of shopping baskets into the
world's biggest advertising company by sales.
However, excessive pay awarded through complex programs has
attracted growing protests from politicians, the public and
investors in recent years. More than 20% of shareholders at WPP's
annual meeting last year rejected the firm's compensation plan.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
March 15, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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