WPP’s poor share price performance could cost its chief executive, Sir Martin Sorrell, up to £44 million, despite a leap in his pay cheque by more than a third to £3.3 million.
Sir Martin could still get his full bonus if WPP’s share price takes off over the next three years. However, for the maximum pay out, WPP would have to come in the top two of its peer group, which includes Omnicon of the US and France’s Publicis, when the five years’ results are averaged out.
Yesterday’s annual report from Britain’s number two advertising group, details a shake-up and simplification of pay and incentives following complaints from its executives and a flurry of poaching by competitors.
The report says a review revealed the use of the three-year stock options “had become a major source of executive dissatisfaction”, were “both complex and volatile”, and had “little motivational or retentive effect”.
Poaching was thus becoming a “considerable concern”, WPP said, “and was often accompanied by senior executive frustration”. WPP is now bringing in a raft of changes, which it says will simplify the rewards structure while “staying true” to its principles.
Although Sir Martin received no stock options, his pay last year included a bonus of £1.6 million. He also received £343,000 for his pension. Sir Martin created a storm of protest last year when it was revealed that he pocketed £50 million worth of shares.
Earlier this year, the global advertising company announced record results for 2005, enjoying a 36% year on year increase in full-year profit and a rise in revenue of 25% to £5.4 billion (see WPP Enjoys 36% Rise In Profits For 2005).
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