One of the delights of this time of year is the classic sporting events: the Derby at Epsom, cricket at Lord’s, tennis at Wimbledon, racing at Royal Ascot, rowing at Henley, and what is perhaps the favourite blood sport in the City – the hounding of Sir Martin Sorrell over his pay as chief executive of WPP.
On Thursday a group of local authority pension funds and a voting advisory group declared their intention to oppose his pay package at the annual meeting next week. There were protests last year too, and indeed the year before.
Now half of me thinks no chief executive needs to earn the £17.6m he is scheduled to collect. But pay levels have lost all touch with reality, and that being the case, Sir Martin deserves the money much more than most. Shareholders should direct their anger at the failures, not the successes.
Sir Martin, pictured, operates in a sector, media and communications, which has experienced wrenching upheaval and change in the past 10 years. It would have been easy for the business to have clung too long to its old ways, to have failed to embrace the new, and to have become rapidly irrelevant. But it has not. While most of the media has struggled to adapt, WPP has made itself as relevant to the new media as it was to the old, even setting up a collaboration deal with Twitter this week. Investors seem to take it for granted that the business is still here and relevant. But that to me is a singular achievement.
It is also good at what it does. As one of the world’s biggest advertising and marketing groups it goes head-to-head daily with giant American, European and Asian rivals in markets across the globe, and in most it more than holds its own. How many other British groups can say that? Third, he has skin in the game. Too many management incentive schemes are like the Caucus race in Alice in Wonderland in that no one ever loses; everyone gets a prize. But the WPP schemes have always required Sir Martin and the other executives to put a large slice of their own money into the pot, which the company then matches or exceeds if things go well. Obviously this time it went well. But the point is he does stand to lose his own money.
Finally it is his business. Disgruntled shareholders say he should not pay himself as an owner when he is just an employee but he is not just any employee. I know technically that he started with a shell company on the Stock Exchange and from the early days he has grown the business by acquisition as well as organically. But it was still his vision, drive and willingness to take risk which created a global giant and it was his grit and resilience which held it together when it could easily have gone under in the 1990s recession. He may be an employee but the group is his creation as much as Virgin group is identified with Sir Richard Branson.
What worries me about WPP is not the money but rather that Sir Martin is getting on in years and from the outside there is no obvious successor. And that is what shareholders should be concerned about. The issue is not how much Sir Martin earns, but whether they will ever find anyone who will do it better.