Fund groups investing in WPP have called for the advertising giant to plan for CEO Sir Martin Sorrell’s retirement, deeming it “the biggest risk facing the company”.
Royal London Asset Management, which holds 6.18 million shares in WPP, 0.48 per cent of the firm, says “there is still work to be done” ahead of Sorrell – who is in his 70s – stepping down.
Ashley Hamilton Claxton, corporate governance manager at RLAM, says: “Together with other investors, including Standard Life, we have pressed the chairman into making real progress with succession planning. We are pleased that the board is taking this task seriously, by conducting more rigorous sourcing of potential internal candidates from group companies.
“Planning for succession is, however, still the biggest risk facing the company in our view, and there is still work to be done to assure shareholders of an orderly and stable transition when Sir Martin steps down.”
Standard Life Investments, which manages 19 million shares in WPP on behalf of clients – 1.5 per cent of WPP’s issued share capital – sent governance and stewardship director SLI Deborah Gilshan to speak at the WPP’s AGM today.
Gilshan said orderly management succession is “the key governance risk to our long-term investment in WPP”, adding: “As another annual meeting passes, the time to address succession for the CEO shortens and the necessity to do so becomes more pressing.”
Gilshan called for Sorrell – who is not required to give notice of should he wish to leave – to agree to providing “sufficient warning” of his plans.
She says: “We suggest that the board consider what lead time would be required to ensure an orderly succession and discuss this with Sir Martin. We would like the board to come to an agreement with him that, other things being equal, he will provide sufficient warning to meet this timeframe.
“In our opinion, this increases the likelihood of a seamless succession as it would allow the board to execute their succession plans effectively and would reduce further the risk profile of the company.”
On Sorrell’s proposed pay deal, RLAM’s Claxton slammed the “excessive” renumeration.
“Executive pay at WPP continues to look excessive,” Claxton says. “While we acknowledge that the reduction in the total long-term bonuses and incentives available to executives under the new remuneration policy is a step in the right direction, the sheer scale of these remains exceptionally high, at over nine times the salary for the CEO. As with previous years we will be voting against WPP’s remuneration report and also this year’s new remuneration policy.”
More than a fifth of the investors in WPP voted against Sorrell’s £48m pay package at the AGM, the lowest level of resistance since 2010. In 2012 almost 60 per cent of investors rejected his pay in one of the biggest shareholder revolts. Since then WPP has cut back Sorrell’s pay, which was £70.4m in 2015, one of the largest corporate pay packets on record in the UK.