Drugi jezik na kojem je dostupan ovaj članak: Bosnian
WPP’s annual report for 2017, released late last month, revealed that the recently departed CEO of the holding company had his salary cut by 71% in 2017. His salary in 2016 amounted to $66.4 million, while in 2017 it amounted to “only” $19.2 million after they adopted a more modest five-year executive incentive plan, AdWeek reported.
Under this new incentive plan, called Executive Performance Share Plan and 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.
This also came in the wake of disappointing business results in 2017, especially in the North American market, where the world’s biggest holding company saw a 2.5% market drop. Sorrell was not the only one who’s salary was cut, as the plan includes all executive staff, so for example the salary of WPP’s finance director Paul Richardson was cut last year to $5.2 million, from $12.8 million in 2016.
“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.
Earlier last month, Sorrell abruptly stepped down as CEO, ending his 33-year reign over the world’s largest advertising company.