Sir Martin Sorrell is playing it cool over WPP pay vote

The ad agency chief must wait until next week to see if investors think he's worth £12.9m. But if Sir Martin's worried, he isn't letting it show

If you want to know what drives the advertising tycoon Sir Martin Sorrell, then watch an interview with him and a ditzy lady in pink for the Valley Girl Show in the US. Sitting on a pink and leopard skin stiletto shoe, Sir Martin talks about how his Ukrainian grand-parents had to put Xs on their marriage certificate when they came to the UK in 1907 because they couldn't write English, and ends up tying a pink tie in a bow around his neck.

It's clear this man will do anything for WPP; it's his baby.

Sir Martin laughed out loud when I mentioned the interview: "It was so embarrassing. I felt like a complete berk but you've got to communicate. If you don't make your case and communicate, no one listens."

Right now he's hoping that WPP's investors are listening to why he's worth his £12.9m pay package. But if Sir Martin is worried investors will shoot him down at next week's annual meeting, he's not letting on: "You tell me," he said with a smile and a shrug. "We will see on the day. My pay is linked totally to how WPP does – 85 per cent of it is performance-based. When WPP suffered in 2009, my pay suffered too."

But what Sir Martin does find offensive is when investors claim he acts as an owner: "Well, I am an owner – I have nearly 2 per cent of WPP shares. If they said I am acting like 'the' owner, then they might have a point. I have been entrepreneurial since the day I started in 1985, and I still am today and that's why I have skin in the game."

He added: "You feel self-conscious bragging about what you have achieved so I don't often point it out. But I founded this company with £250,000 – borrowed against my Saatchi shares – and it is worth £10bn today. There is something curious about the way the British criticise success rather than admire it."

Sir Martin has done well too: since starting WPP he has invested, including all the stock he's been granted from direct shares and co-investment schemes, about £40m and the stake is now worth about £140m: "Keeping stock for five years can be a suicide pact with yourself, but it's one I make because I want to be part of WPP's success."

But he can also be "fired at will", as he has no contract. "I'll keep going until they can take me out and shoot me like they do horses. That's my risk." And, if the proverbial bus comes along and runs him over, he said there is a succession plan in place.

For now, the 67-year-old looks fighting fit. We meet in the WPP mothership which is hidden behind a canary yellow door in unremarkable offices in Farm Street, Mayfair.

He's as combative as always, claiming that his pay has become contentious for political reasons: "The debate used to be about reward for failure – which I disagree with too – but it's moved on to what is fair pay. That's a political issue and everyone is scared of government threats to bring in new legislation to make votes binding on remuneration. What will government do about the bosses of hedge funds, private companies or even fund managers who get paid as much or more than those of listed companies?"

He will find out just what investors think next Wednesday when the vote is read out at the Four Seasons hotel in Dublin. Up to 40 per cent of investors are said to be voting against. Others say they will punish the chairman Philip Lader and head of the pay committee, Jeffrey Rosen, by not re-electing them.

In his defence, Messrs Lader and Rosen say Sir Martin is worth every penny because 2011 was a record year: WPP's billings were up at £44.8bn, revenues 7 per cent higher at £10bn and pre-tax profit at a high of £1.43bn. They also say he hasn't had a pay increase for five years, and that investors are not comparing like with like in the international peer group.

So what does he think? Is his pay fair? "That's not for me to say – the compensation committee sets my pay. But investors in WPP have done well."

He pointed out that if a shareholder had invested £1,000 in WPP in 1985, those shares would be worth £46,000 today – that includes dividends – or £31,000 on share price movement, and allowing for all share dilutions: a compound annual return of 15 per cent or 13.3 per cent respectively.

"The UK has done well too – we've paid millions in tax over the years and are creating new jobs all the time: 1,500 over the last two years."

On a screen in the corner of the boardroom are the logos of the 150 or so advertising, PR and marketing companies that WPP controls in 108 countries. It's a monster of a machine which includes some of the best names in the ad world including JWT and Ogilvy & Mather and employs 158,000 people in 2,500 offices and has 730 clients around the world.

Even more pertinent than the pay debate is how he manages to keep track of the business: "I don't try to," he said. "It's a messy organisation; we call it horizontality and it works because we have great people on the ground running the agencies, and local areas."

Instead, the WPP central portal acts like a brain for the global network; sharing recruitment and training, IT, knowledge, talent management and financial services, he said.

"For Ford, we created a new agency, Team Detroit, out of six agencies, and they work for the company around the world. We have a similar model for Bank of America."

But there is work that slips through the net – the latest Argentinian advert in the Falklands being one example. "That was disgraceful," he said.

This year the WPP advertising machine will be in charge of handling some $75bn (£49bn) of advertising and media buying for its clients across media platforms from newspapers to online sites. Sir Martin claims clients do get better service and return on investment from being part of the machine: "Clients, like Ford or Bank of America, get the benefit of a world-wide team. WPP does too. We've done the analysis. There is a direct correlation between the artistic side, the awards our agencies win, and the margins."

He's so persistent making his own case I ask whether he's ever been tempted to advise on advertising?

"God, no," he laughed. That's the day to short the stock."

Online advertising is the new Holy Grail and he estimates there is about $20bn of new advertising to be spent on the web; clients spend an average of 19 per cent of their total online now but he predicts this could go to 30 per cent over time. For example, client spending has gone up by only 4 per cent to $2.5bn for News Corporation this year, but spending with Google has risen from $1.6bn to $2bn and has doubled on Facebook from $200m to $400m.

"Just look at Amazon – it's proving a real threat to many companies. Our media day has expanded – the number of hours people spend online and watching TV has shot up."

He predicts another shift in the geo-political axis towards the south, alongside the east: "The 21st century is not for retiring minds; there are some big challenges which we could all get very wrong. But if we get it right, there will be interesting opportunities emerging in South America, the Middle East as well as Africa; the World Cup in Brazil will bring big benefits just as it did to South Africa."

Famed for coining the alphabet to analyse economic growth, Sir Martin says his LUV-shaped recovery has turned out to be more LuVVY in shape and predicts recovery in the West will take years. Indeed, he wonders whether corporates – which are sitting on trillions of cash in the US and Europe – will ever behave as they did before 2009.

"Companies are terrified of spending, and investing. It's not simply about confidence, they fear making mistakes; the shock to corporate confidence after Lehman was almost as profound as the impact on the banks."

At the same time advertising is changing – more focused towards responsible consumption: "In the long-term, companies know they have to be responsible, particularly in these tough times; they are not paying lip-service to corporate and social responsibility, their staff want it as well as consumers. So do ours. It makes business sense."

What will he do if the WPP vote goes against him?

He shrugged again, and you sense he's been bruised by the controversy: "The Government makes the rules and we make our choices. If government or institutions think pay is excessive, tax it. Don't fiddle with the market."

Long-term rewards: Sir Martin Sorrell

Sir Martin's salary rose by 30 per cent in 2011 to £1.3m, there was a £2m cash bonus and £3m in shares, a pension contribution of £585,000, plus other benefits of £459,000, making a total of £7.34m. Add in the long-term incentive plans from 2006 to 2010, and that's another £5.6m – which he was allocated in shares – bringing the total up to £12.9m.

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