As the ad agency is subjected to the first binding vote by shareholders over its pay plan during the annual meeting in London on Wednesday, the Local Authority Pension Fund Forum (LAPFF), which represents 60 public sector retirement funds, has advised its members to vote against the board.
But WPP's third-biggest institutional investor, Scottish Widows – which holds around 2.5% of the stock and has led previous shareholder rebellions over the size of Sorrell's pay – has reportedly decided to back the board.
Rebels are unlikely to succeed in throwing out the remuneration policy, which under new government rules is designed to give shareholders a say on pay, requires a simple majority of votes cast to pass. About 30% of shareholders are expected to abstain or oppose the board. Last year, more than a quarter of stockholders opposed or abstained over pay.
Blackrock, the second-largest holder with 3.5%, and Legal & General Investment Management are expected to support the new pay policy, which came into effect last year after a shareholder rebellion in 2012. Standard Life Investments, another major holder, is expected to oppose the board, according to Sky News.
Under the new plan, Sorrell could earn as much as 14 times his £1.15m base salary in performance-related pay each year, giving him a maximum reward of £19.3m annually including benefits, pension payments and dividends. Some shareholders have criticised WPP's policy of letting directors collect dividends from performance shares that they have been allocated under long-term schemes but do not yet own. The current remuneration plan runs for three years and will be reviewed before 2016.
In addition, Sorrell is still entitled to payouts from previous long-term plans. Awards under WPP's contentious leadership equity acquisition plan (Leap) will continue until 2016. This is because the scheme ran until 2012, but executives are not able to claim their shares for five years. By 2016, Sorrell is expected to receive 7.8m shares from Leap, worth £97.5m at today's £12.52 share price.
Added to his current pay plan, the legacy schemes could earn Sorrell more than £100m over the coming three years. In 2013, he took home nearly £30m thanks to a mixture of new and legacy schemes, with £22.6m coming from Leap.
The LAPFF says WPP's pay policy is overly complex, with directors rewarded under six separate and concurrent schemes.
Kieran Quinn, chair of the LAPFF, said: "Overall, it is excessive and does not have our support … The Forum will continue to highlight examples of where senior leadership of large corporations seek complex salary and bonus packages that are not justified by performance and are out of step with shareholder and community expectations of reasonable reward for effort."
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