The world’s biggest advertising agency WPP faced a shareholder revolt over its handling of the departure of former CEO Martin Sorrell after large votes against the chairman and the company remuneration report. The most famous advertising executive in the world, Sorrell quit the marketing giant he built from scratch following an allegation of personal misconduct in April. Nearly 30% of WPP shareholders failed to back its executive pay proposal yesterday, while almost 17% of shareholder votes declined to support the re-election of Roberto Quarta as chairman.
Sorrell was allowed to leave with share awards worth millions of pounds intact and without a non-compete clause, rekindling arguments that have dogged previous annual meetings — that WPP paid Sorrell too much and did not prepare for his departure. Neither Sorrell nor the company have revealed the nature of the complaint, but Sorrell — who has already launched a new venture — has denied any wrongdoing. Quarta said at the beginning of the group’s annual meeting that the process the board followed in response to the allegation against Sorrell was robust from a governance and legal perspective.
He said share awards due in future to Sorrell pre-dated the current board’s involvement and that he accepted that some investors found the situation unsatisfactory. “I know that questions remain, but there is simply nothing further we can legally disclose,” Quarta said. Quarta told investors that the hunt for a new chief executive was well advanced and moving ahead rapidly. Shares in WPP traded up 0.7% at 1142 GMT, slightly ahead of Britain’s bluechip index which was trading 0.4% higher.
WPP is the world’s largest ad group, employing more than 200,000 staff in agencies including JWT, Ogilvy and Finsbury to serve clients such as Ford, Vodafone and P&G. In a trading update published to coincide with the annual meeting, WPP reported four-month net sales which were marginally up, an improvement on the 0.1% fall in net sales in the first quarter. The group has been hit by the might of Google and Facebook in online advertising, the advance of consultants like Accenture in the sector and by pressures on big ad spenders such as P&G and Unilever which have all hit the bottom line.
It is not the first time investors have expressed opposition to WPP’s pay proposals. Sorrell has earned around £200mn ($268mn) in the last five years alone, and in 2016, a third of WPP’s investors refused to back his £70mn pay package. Sorrell’s last award scheme could potentially pay out £20mn, but it is expected to come in well below that due to the recent underperformance of the group.Quarta has said the two chief operating officers running the company, Mark Read and Andrew Scott, are reviewing the strategy, sparking speculation that the group could sell assets such as its market research arm. His departure has led to speculation that WPP could even be broken up but the three executives running the business have said that does not make sense.
Sources and photo-credits: Bloomberg, Gulf Times