(Bloomberg) -- WPP Plc reduced the value of Martin Sorrell’s nominal pay package by about 22 percent to a maximum of 15 million pounds ($19 million), seeking to calm shareholders who have criticized the chief executive officer’s remuneration as excessive for years.
The figures, which include salary, bonus, stock grants and pension, don’t reflect share-price appreciation over the program’s multiyear term, which has driven up the value of 72-year-old Sorrell’s pay in the past. For 2016, the last year Sorrell collected significant compensation from a previous five-year long-term incentive plan, the CEO’s pay totaled 48.1 million pounds, down from 70.4 million pounds for 2015.
Sorrell, who has topped Britain’s annual executive-pay lists on several years including 2014 and 2015, has become the focus of investor concerns over CEO compensation, with activists campaigning against arrangements they deem excessive. Last year, about 33 percent of shareholders of the world’s biggest advertising company voted against Sorrell’s total pay package.
“There is a considerable amount of shareholder discomfort about how much he’s been paid in the past and how far ahead it is of the other FTSE100 CEOs,” said Richard Scrope, a fund manager at Crux Asset Management, who holds WPP shares. "The reduction is an attempt to satisfy that disquiet.”
John Hood, chairman of the compensation committee, said in Friday’s report that the board was responding to investors’ feedback. “Notwithstanding the company’s superior performance, we understand share owners’ increasing discomfort with the levels of our programs’ reward opportunities for outstanding performance,” Hood said in the report.
Last year’s award was the maximum available for Sorrell under the LEAP reward program that started in 2012 and ended in 2016. (The last shares awarded under that plan vested on March 7 of this year.) WPP, whose agencies include Ogilvy & Mather and Young & Rubicam, says the amounts paid to Sorrell and other company executives in recent years reflect the superior returns generated for investors. WPP’s shares rose 169 percent over a five-year period, beating the 28 percent gain by the FTSE 100 index.
The changes announced on Friday affect WPP’s Executive Performance Share Plan, a stock-grant plan that replaced the LEAP plan, typically the biggest part of Sorrell’s annual pay package, as well as a short-term incentive plan. Sorrell’s base salary was unchanged in 2016 at 1.15 million pounds.
In addition to lowering the maximum value of the EPSP share grants, WPP said that from November it would stop paying Sorrell dividend-equivalents on the shares granted. With that change, the maximum annual compensation would fall to 13.2 million pounds.
Sorrell, who founded WPP in the 1980s, is the only CEO that WPP has known and the second-longest serving chief among FTSE 100 companies. While he’s shown no signs of slowing down, investors have expressed concerns about succession planning at the company.
In WPP’s annual report published Friday, Chairman Roberto Quarta said the company has made progress in assessing internal and external candidates for CEO and finance chief succession and considering skills and development of internal candidates.
"Whether it happens in the near or distant future, when Sir Martin leaves his role as chief executive we will have an exceptional team of potential candidates on the bench,” Quarta said.