Farewell package for WPP's Sorrell faces investor backlash
WPP`s decision to allow founder Martin Sorrell to quit with share awards worth millions of pounds faced fresh opposition on Tuesday as Hermes EOS advised shareholders to vote against the advertising giant`s remuneration report.
Anger over the handling of Sorrell`s departure is set to dominate WPP`s annual meeting in London on Wednesday where investors will target the one issue that caused uproar during Sorrell`s tenure - the amount he was paid.
WPP`s incentive plans have led to opposition in the past, with Sorrell earning around 200 million pounds in the last five years alone. A third of WPP`s investors refused to back his 70 million pound ($94 million) pay package in 2016.
Sorrell`s last award scheme could potentially pay out 20 million pounds but it is expected to come in well below that due to the recent underperformance of the group.
Other shareholders are set to target the re-election of the WPP`s chairman, Roberto Quarta, after Sorrell quit the world`s biggest advertising firm following an inquiry into allegations of personal misconduct. Some investors have expressed concern about the handling of Sorrell`s exit.
Neither Sorrell or the company have given any details of the complaint and the 73-year-old has since set up a rival ad firm.
"Given the lack of confirmed information about the reasons for the former CEO`s departure, we do not believe we can assess whether his termination package is appropriate," Hermes EOS` Pauline Lecoursonnois said in a statement.
Another WPP investor, California State Teachers’ Retirement System (CalSTRS), said it voted against Quarta`s re-election because it did not consider him independent.
But in a boost to Quarta, two major shareholders, including WPP`s biggest, told Reuters they still backed him.
The Hermes decision to oppose the pay report, which governs executive pay in the year just gone, sees it break ranks with the world`s biggest adviser, Institutional Shareholder Services, which last month said it would support it.
The firm is preparing for a sizeable rebellion against the remuneration package, with concerns within the company that more than a quarter of investors could vote against it.
Investors are targeting the pay awards after WPP agreed Sorrell could leave with his long-term incentive plan intact, meaning his share awards will vest over the next five years as company targets are met.CLARITY CALL
Hermes, which advises pension schemes and other institutional investors on how to vote at corporate meetings, said it backed all other agenda items.
It also supported the re-election of Quarta, who, it said, had overseen an improvement in the board`s effectiveness since taking over in 2015.
Hermes said given the structural challenges facing the industry, the board needed to make the right CEO appointment and ensure all strategic options for the company were considered.
"We will be asking the chair for clarity on the key criteria the new CEO needs to meet, whether a formal review of the strategic options and of the portfolio has already commenced, how much can be done before the appointment of a new CEO and how the board is involved," Lecoursonnois said.
David Herro, Chief Investment Officer of international equity at WPP`s top fund investor Harris Associates told Reuters he also backed the re-election of the board.
"(We support WPP on) board re-election. I want to make sure on the rest," Herro said in an email.
Harris has a 7.5 percent WPP stake, according to Thomson Reuters data.
A second top-20 investor, who wished to remain anonymous, said he also backed Quarta.
"We are supportive of the chairman who has handled a very difficult situation well in circumstances neither of his making or choosing."
CalSTRS said it voted in favour of the remuneration report, saying it looked at the report "holistically".
"In other words, while there might be one action we’re not in favour of, if the report as a whole is satisfactory then we vote in favour," it said in an e-mailed statement.
($1 = 0.7476 pounds)
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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