WPP's Sorrell sells shares to meet £9m tax liability

Click to follow
The Independent Online

Sir Martin Sorrell, the chief executive of WPP, has been hit by a £9m tax bill as a result of changes to his employment status with the global advertising and marketing group. To meet the liability Sir Martin has sold shares in the company for the first time in its 20-year history.

Sir Martin Sorrell, the chief executive of WPP, has been hit by a £9m tax bill as a result of changes to his employment status with the global advertising and marketing group. To meet the liability Sir Martin has sold shares in the company for the first time in its 20-year history.

He is also set to agree a new employment contract which will involve an "at will" clause that, in effect, means he will not have any notice period.

Sir Martin would be free to leave the group, which includes agencies such as J Walter Thompson and Ogilvy & Mather, immediately, should he wish, while the company could fire him with equal alacrity. His current contractual arrangements, which in the past have been subject to criticism from City corporate governance experts, are due to expire at the end of August, leaving him and the company without an agreement over his future employment.

However from 1 April, Sir Martin will be employed directly by WPP for the first time in years. Until now his services as CEO have been provided through JMS Financial Services, a management company which receives a fee from WPP and then pays Sir Martin. That arrangement is to cease as the perks enjoyed through service companies have disappeared under consecutive Budgets in which Gordon Brown has sought to close various loopholes.

Sir Martin is winding up JMS but in doing so has triggered a number of share option awards made by WPP over the past 12 years but which have also crystallised a £9m tax liability.

The net effect is that he is reducing his total holding in WPP while raising £6.89m in the process. His interest in 313,976 shares granted under the WPP Performance Share Plans dating back to 1999 have also been realised, raising a further £2m to help fund the tax bill. Sir Martin and his family are now left with 15,639,437 shares, which at yesterday's closing price were worth £95.4m.

Sir Martin used to have a rolling three-year notice period, which was reduced to two years, renewable on an annual basis. However, the last time the contract was renewed was in August 2003, meaning it will expire this summer. He is understood to be willing to consider an "at will" clause because he has so much wealth tied up in WPP that he would never willingly walk away from the company.

As part of the new employment arrangements, JMS has also transferred 1,459,010 shares, worth £8.9m, into Sir Martin's pension fund, the JMS Retirement Benefit Scheme.

Comments