WPP chief executive, Sir Martin Sorrell, has received a £60m bonus following the release of shares from a long-term bonus scheme which has been triggered by the advertising company’s strong performance.
The shares will take Sorrell’s pay deal for 2015 to £70m once his salary and annual bonuses are taken into account, marking his biggest ever payday at the helm of WPP.
News of Sorrell’s pay is being announced at the start of the AGM season for the UK’s stock market-listed companies. Issues such as generous pay rises, over-stretched directors and boardroom succession planning are expected to be the main talking points of the session.
Sorrell’s bonus is likely to be met with discontent among shareholders who pressured the company into scrapping the long-term bonus scheme in 2012. It will now be phased out next year however it is likely to remain a predominant issue with shareholders with shareholder advisory firms such as ISS touting pay as a main trigger to shareholder rebellion.
Onur Tosun, of Warwick Business School, is assistant professor of finance and researches executive pay. He says that a chief executive’s pay should reflect the improved performance of the firm but stressed it should be “kept at a sensible level" to incorporate the concerns of the firm’s investors.
“Compensating the chief executive with shares and options will align the chief executive pay with firm performance,” says Tosun.
Tosun warns that this approach has to be balanced though as shares may disproportionately increase the total pay as the firm’s share price rises.
“Unhappy large shareholders may try to stop the pay decision via voting against it and if their voice is not taken into consideration, they may decide to sell the shares of the company which may result in a negative perception against the firm in the markets. Eventually, other investors may react to that and the company’s share price may plummet.”
WPP is set to confirm this week that it outperformed its peers and the FTSE 100 from 2011 to 2015.