James Moore: This £36m bonus forces executive pay on to the political agenda


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If crazy pay wasn’t already a part of the election campaign it surely is now.

Sir Martin Sorrell, who regularly appears in the “most outrageous” class, has made it that way with the news that he is to receive £36m in shares under one of WPP’s confusing array of executive bonus plans.

The award is being made under something called the “leadership equity acquisition plan”. It works like this: you buy some shares. Then, if the company clears the right hurdles, you get up to five times as many free ones as a thank you.

You might think a FTSE 100 chief executive would be only too willing to back his business by buying shares in the company he runs, without the need for such extras. It’s not as if, with a salary package that would make even many Premiership footballers envious, he lacks the resources.

Now, it’s true that this plan no longer exists and Sir Martin’s £36m payment – the  maximum under the scheme – is therefore no more than an artefact of some very bad boardroom practice.

But it is also an artefact of some very bad practice by City institutions.

The very fact that WPP’s board was allowed to get such a scheme on the books in the first place says a lot about the sort of job the aforementioned institutions had been doing in looking after clients’ money and in stewarding the investments made on behalf of those clients.

Business Secretary Vince Cable helped the job of policing behaviour like WPP’s by handing shareholders a mandatory vote on companies’ pay policies. But more needs to be done. As the election campaign cranks up, many will now call for high taxes on the super-rich like Sir Martin in response to this sort of thing.

It is an understandable reaction to what looks like out-and-out greed, at a time when millions of people are still struggling and the ranks of the in-work poor are growing.

Still, as millions of people wonder how to invest their savings in retirement thanks to the Chancellor’s pension reforms, more thoughtful politicians might start to realise that it is rather important that people are properly looked after by the companies competing for their funds.

That way, when remuneration consultants suggest ideas like the “leadership equity acquisition plan” in the future, boards will know that they won’t be able to get them approved – and will send the consultants back to their drawing boards.

The belated review of business rates

Talking of business and election campaigns, another salvo was fired by Danny Alexander, the Chancellor’s number two, who has unveiled a review of business rates.

These have been held responsible for turning high streets into graveyards of betting shops and boarded-up premises. Despite a steady stream of evidence that they are proving highly damaging in their current form, it has taken until now to spur the Government into doing something. There are some positive suggestions, such as hints about making the system more accountable for the usage of business premises and the possibility of taking lots of smaller premises out of the net entirely.

The Government is also suggesting reforms to make rates better reflect the value of the properties being taxed. That’s a nod to the current linkage to “rentable value” which has led to a perverse situation: where rents have fallen, rates have sometimes failed to follow suit and are in some cases now the single biggest cost to businesses.

Perhaps the linkage with property could be dropped entirely in favour of… What? No one’s saying. The Treasury poses a long list of questions without giving any clear idea of which way its thinking lies.

What we do know is that the reforms are supposed to be fiscally neutral. Which means that if Paul’s getting a handy tax cut, Peter is going to have to pay for it. But what happens if Peter is someone we want to encourage, such as a manufacturer?

It’s issues such as this which make property taxes notoriously difficult to reform. The only thing that can be said for them is that the alternatives all create headaches of their own.

Probably not for Mr Alexander, however. He’s in a real battle just to keep his seat. Now he can at least tell the businesses of Inverness, Nairn, Badenoch and Strathspey that he’s finally woken up to their plight. Isn’t that nice?

More interest rate swap questions than answers

 When you find a hole of nearly £30m in your accounts, a call to the lawyers is all but inevitable when you’ve got things stabilised. Or semi-stabilised.

This is what the Manchester Building Society has duly done over its dealings with interest rate swaps. Having written fixed-rate mortgages, it bought one of these to protect it should rates move against it. Unfortunately it bought the wrong type of swap, and things went pear-shaped when a review of its accounting revealed the swap wasn’t doing what it said on the tin...

So – off to court to try to get the money back from the auditor that advised on the accounting, Grant Thornton, which says such legal claims are an inevitable part of its business. The question the auditor, and its regulators, need to answer is why that is. The question the Manchester, and its regulators, need to answer is how it ever got to this place.