Advertising giant WPP faces a fraught annual meeting next month as investors and shareholder advisers grow increasingly frustrated over the lack of information about the abrupt departure of founder and long-time leader Sir Martin Sorrell.
Sir Martin quit the company in April, just weeks after the board launched an investigation into an allegation of personal misconduct, which he denies. WPP has not provided details of the investigation, other than to say it did "not involve amounts which are material to WPP".
Despite disappointing results and share price falls in the past 18 months, WPP said it would treat his departure as a retirement and pay Sir Martin almost £14 million for 2017.
Glass Lewis, the advisory company whose recommendations influence votes at annual meetings, has called on shareholders to vote against the company’s pay report, saying: “Absent further information regarding Sir Martin’s retirement, we believe shareholders are unable to determine the extent to which he should be treated as a good leaver.”
Concerns
Glass Lewis also recommended shareholders do not support the re-election of chairman Roberto Quarta because of succession planning concerns: Sir Martin is leaving after three decades in the business and a successor has not yet been named.
The nomination committee, which nominates board members “has failed to adequately prepare for the replacement of Sir Martin”, said Glass Lewis.
Several large shareholders have also voiced concerns about the board’s lack of disclosure of the investigation.
“[The finding of the investigation] has to come out. If you are going to make a fresh start, you can’t just brush it under the carpet. The rumour mill is working overtime. If there have been issues, it is important that the company shows it recognises what has gone wrong and ensures that it won’t happen again,” said a shareholder.
Investigation
WPP said its board followed “due process on receipt of the personal misconduct allegation by appointing counsel to conduct an independent investigation”.
WPP has had a challenging 18 months as brands have cut their advertising spending. Sir Martin’s pay fell from £70 million in 2015 to £14 million in 2017, as WPP’s performance worsened. But the former chief executive was set to leave WPP with share awards worth about £20 million.
The company’s share price has risen 18 per cent since Sir Martin left the business, but remains down 3 per cent over the past year.
Tim Armstrong, the former AOL chief executive, and Keith Weed, the chief marketing and communications officer at Unilever, are among those who are being considered to replace Sir Martin, according to people with knowledge of the search process. – Copyright The Financial Times Limited 2018
