WPP and Aviva face shareholder showdowns over boardroom pay


Sir Martin Sorrell gets £300,000 pay rise and potential £3m extra bonus, while Aviva boss turns down 4.8% boost that would have pushed him above £1m

Two more companies – advertising group WPP and insurer Aviva – are facing a showdown with shareholders over boardroom pay amid a wave of new found activism among big City investors.

WPP risks stoking a row by handing its founder and chief executive Sir Martin Sorrell a 30% rise in his salary to £1.3m and doubling his potential bonus jackpot. He took home almost £13m in salary, bonuses and benefits in 2011, including a long-term incentive plan worth £5.5m.

The insurance company Aviva was racing to avert an embarrassing rebellion at its annual general meeting on Thursday by promising to reduce “golden hellos” for new recruits and announcing that chief executive Andrew Moss will not accept the 4.8% rise that would have pushed his £960,000 salary above £1m.

The move by Aviva follows the last minute alterations that Barclays made to its bonus plans and a wave of protest at companies as diverse as Smith & Nephew and Capital Shopping Centres. Big companies such as fund manager Man and pharmaceutical company GlaxoSmithKline hold annual meetings this week that may prove controversial.

The pay rise for Sorrell, who turned shell company Wire & Plastic Products into an empire that includes media buyers Mediacom, market researchers Kantar, and public relations firm Hill & Knowlton, was going to be as large as 50% but after a consultation with shareholders last summer, was scaled back to 30%.

Jeffrey Rosen, the chairman of WPP’s remuneration committee, who led the consultation with shareholders, told the Guardian that the salary increase was needed as Sorrell had received only two rises in the past decade. Since 2007, Rosen said WPP had grown from employing 80,000 people in 2,000 offices to more than 113,500 in 2,500 while revenue had increased almost 70%.

“The question in my mind and the committee’s mind is what’s fair and what’s motivating for the executive, what’s appropriate for the company and what’s appropriate for the shareholders,” said Rosen.

In WPP’s annual report he conceded that “following our 2011 AGM we recognised that a number of our share owners had issues with some aspects of the group’s executive compensation arrangements.” At the annual meeting in June 2011 more than 40% of shareholders rejected the pay awards to WPP directors, particularly because of a 30% pay rise for Mark Read, the chief executive of WPP Digital.

Sorrell – who ranks 438th in the Sunday Times Rich list published on Sunday with £174m of wealth -took home £50m of shares in 2005 after a long-term share scheme – known as a leadership equity acquisition plan, or Leap – paid out. While Sorrell’s contract allows him to leave “at will”, Rosen conceded that Sorrell “is about as committed to this company as anyone can be”.

The company also risks the wrath of investors after allowing the so-called Leap that will appear in next year’s annual report – and revealed to the stock market in March when 386,344 shares were released to him – to take account of currency moves that would otherwise have prevented payment.

His £1.3m salary comes with the potential to earn up to 500% of that in bonuses – an extra £6.5m. Until now he could receive up to £3m in bonuses – some 300% of his £1m salary. Some 60% of his 2011 bonus is being paid in deferred shares, up from 30% a year ago. Sorrell is also getting 45% of his salary paid into his pension, compared with 40% in the past.

At Aviva, the chairman of the remunertion committee Scott Wheway, admitted to mistakes over handling of boardroom pay.

“We take the views of our shareholders very seriously,” said Wheway. “I am disappointed that we haven’t done that as well as we should have on this occasion. A number of shareholders have indicated that they would like to see a different approach to the way we compensate senior directors on recruitment and an even closer correlation between our pay packages and shareholder returns.”

Moss received a total pay and perks package worth up to £5m last year dependent on certain targets being met.The insurer’s UK head, Trevor Matthews, who joined Aviva from Friends Life in November, collected a £2.2m welcome package, including a £45,000 bonus for one month’s work and a £470,000 cash payment as compensation for losing unvested shares and his 2011 bonus from his previous employer.

guardian.co.uk

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