LONDON -- The London-based international advertising agency WPP (OTC: WPPGY) -- the largest in the world -- has come under fire at this year's annual general meeting, as the top boss's pay award has been overwhelmingly opposed by shareholders.
The 9.7 billion pound company, ranked 27th in the U.K.'s flagship FTSE 100 index of top shares, released a trading update for the first four months of the year, showing a 7% rise in revenues in sterling, or 5% in U.S. dollars. That's $5.1 billion, which is not small change by any reckoning.
Like-for-like sales are up 4%, and profits and margins are ahead of plan and up on last year. So what was the problem?
Well, against an austere economic background, investors are already a little peeved that pay for FTSE 100 executives has grown 10% over the past year to an average package of 3.7 million pounds. That's over a period when the FTSE has been falling, most people's incomes are being squeezed, and stock portfolios are losing ground.
A 60% rise?!
That average rise for top bosses is dwarfed by the proposed pay deal for WPP chief executive Martin Sorrell. His basic salary rose by 30% to 1.3 million, but once all bonuses are included, he is in line for a massive 60% boost, taking his total remuneration for the year to 6.8 million pounds.
But a number of major investors have today voted against the award, as it is way in excess of the returns enjoyed by shareholders, who are in line for less than 4% in dividends this year and have seen the share price falling in recent months. At a price of 760 pence, the shares are on a forward price-to-earnings ratio of only 10.
Shareholder revolts at other companies have led to resignations, with Trinity Mirror boss Sly Bailey being forced out and banks like Barclays feeling serious discontent.
A massive rejection
With the support of chairman Philip Lader, the argument is that Mr. Sorrell needs to be paid in line with other top media company bosses in order to keep him at the helm, and the poor soul hasn't had a pay rise since 2007.
But that argument has now been rejected by a massive 60% vote at the AGM. Scandalously, shareholders votes are not binding on U.K.-listed companies, though there are signs they may be made so by 2014. So how is the WPP board going to react to this serious snub? According to the chairman, the board will carefully consider the result, consult, move forward, something about "the best interest of shareholders," etc. In other words, we have no idea.
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