In a detailed annual 2017 report released today by WPP, the holding company revealed that recently departed CEO Martin Sorrell’s total salary was cut by 71 percent in 2017 to $19.2 million (€13.9 million) from $66.4 million in 2016 following the adoption of a more modest five-year executive incentive plan.
In 2015, Sorrell took home an incredible $85.2 million (€70.4 million).
Under the new incentive scheme, called the Executive Performance Share Plan (which is in place through 2021), Sorrell received $13.8 million on long-term incentives in 2017, $275,672 on total fixed benefits, a $554,100 pension payment and a base salary of $1.7 million, with short-term incentives not provided due to the company not meeting certain financial targets. Last month, WPP reported a surprisingly weak 2017 that saw revenue in the critical North American market drop 2.5 percent. The report shows Sorrell’s pay package will remain the same in 2018.
WPP finance director Paul Richardson’s 2017 salary was also cut to $5.2 million from $12.8 million in 2016, according to today’s report.
“After extensive consultation with share owners, the Compensation Committee significantly reduced the levels of pay available to the executive directors,” WPP explained in the 2017 report. “This included replacing the LEAP with the EPSP, approved by share owners in 2013. Awards under the EPSP are substantially lower than under the LEAP, resulting in significant reduction in overall quantum of compensation for the executive directors compared with previous years.”
The EPSP was introduced, amid investor pressure, in 2013 to replace a heftier five-year incentive scheme called the Leadership Equity Acquisition Plan, which came to an end in 2016. At that time, 20 percent of WPP shareholders voted to overhaul LEAP. Under the EPSP, WPP reduced the value of Sorrell’s overall pay package by 22 percent.
Thanks to a new directors’ compensation policy approved in June 2017, Sorrell’s pension was also reduced to 30 percent of his salary from 40 percent.
These changes come amid greater scrutiny of executive pay rates at publicly traded companies. This year, the U.S. Securities and Exchange Commission began requiring all such businesses to disclose the ratio of their CEOs’ salaries to those of their median employees as per the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010.
The ratios at agency holding companies are particularly high, with IPG’s Michael Roth making 264 times as much as his median employee and John Wren of Omnicom making 596 times the same variable. As recently as 2016, the ratio between Sorrell’s compensation and that of the median WPP employee was more than 1,000 to 1.
Sources told Adweek earlier this month that both clients and shareholders have voiced their disapproval of these disparities.
Earlier this month, Sorrell abruptly stepped down as CEO, ending his 33-year reign over the world’s largest advertising company. The news followed an investigation sparked by the board of WPP into allegations of “personal misconduct” and misuse of company assets by Sorrell. Wunderman CEO Mark Read and Andrew Scott, corporate development director and chief operating officer for Europe, took over in the interim—and Read sent a memo to all WPP employees to discourage rumors of a holding group breakup.
Last year, WPP reported total billings of $76.6 million and total revenue of $21.1 million.