Jeffrey Rosen, who led discussions over 30% salary rise for Sir Martin Sorrell, risks protest vote against re-election to board
Jeffrey Rosen, the chairman of the remuneration committee of WPP, will be in the firing line on Wednesday when investors are expected to hand a stinging rebuke to the advertising and media company over its pay policies.
An investment banker who led the discussions with shareholders over a 30% salary rise for the chief executive Sir Martin Sorrell, Rosen faces a protest vote against his re-election to the board following a deterioration in the relationship with investors in the FTSE 100 company.
The remuneration report – which contains the details of the rise in Sorrell’s salary to £1.3m and a total pay rise of 60% when bonuses are included – is also believed to be on course to be the sixth remuneration report defeated by shareholders this year.
This would be a record tally of defeats since the vote on pay policies was introduced almost 10 years ago and would mark a high point in the so-called “shareholder spring” this year following the consultation by business secretary Vince Cable over executive pay.
Cable will later this month outline the precise new powers he intends to hand investors to clamp down on pay, although he seems set to back-track on annual binding votes on future pay deals in addition to the current advisory vote. A 75% threshold may be imposed, however, on a binding vote on any new pay policies.
Premier Farnell endured a 30% protest against its pay policies on Tuesday and further rebellions are expected in the coming weeks as the annual general meeting season continues.
The WPP chairman, Philip Lader, is expected to admit to those who attend the meeting that the company needs to embark on a fresh round of discussions with City institutions over pay deals.
But Lader, a former US ambassador to London, is also likely to continue to defend the need to increase Sorrell’s pay on commercial grounds, arguing the chief executive has not had a rise since 2007 and needs to be paid in line with his global peers.
Sorrell last week made a highly unusual defence of his pay packet, writing in the Financial Times that he had set up WPP from one room with two people and market value of £1m to the £10bn company it is today, with 160,00 staff in 108 countries.
A vote against the remuneration report has been cards since a number of high profile proxy voting agencies – who exercise votes on behalf of big institutions – had recommended a vote against the pay awards. While the agencies did not recommend a vote against Rosen, who is managing director of investment bank Lazard, some investors are also thought to have cast votes to protest against his handling of the pay award by either voting against him or deliberating abstaining. He could face a protest of around 20% – similar to that faced by Alison Carnwath, the Land Securities chairman who chairs the remuneration committee at Barclays at the bank’s annual meeting in April.
Rosen settled on a 30% rise in Sorrell’s salary only after trying to win backing in private for a 50% rise in negotiations with investors last year.
The row over executive pay has been reignited following a survey by Manifest/MM&K which showed FTSE 100 chief executive pay had risen 12% last year when the index fell 5%.
MPs also seized upon the mood against top pay at a Treasury select committee when leading City figures faced hostile questions about why executives needed bonuses when nurses and teachers worked for their salaries and the potential impact of putting employees on remuneration committees.
“I don’t think there’s a silver bullet,” said David Pitt-Watson, chair of Hermes Focus Asset Management. The rise in salaries and disparity between boardroooms and ordinary staff was evidence that the system was not working well, he added. The Manifest/MM&K survey shows the multiple of chief executive pay to ordinary workers has risen from 46.5 in 1998 to nearly 140 last year.
Anthony Watson, the former Hermes boss who now chairs the remuneration committee at bailed out Lloyds Banking Group, said individuals had been paid too much in the past “because a great deal of variable pay has morphed in to fixed pay and that is something I am personally very against. You get a salary for coming to work you should get variable pay for creating extra value…”
Watson, who admitted that there were some people in banks who did not add any value, conceded that there might be further bonus claw-backs from Lloyds executives following the need to take another provision against payment protection insurance mis-selling, on top of the £3.2bn charge last year which led to the first claw-backs from directors at any major company.
In an effort to head off a revolt over pay, executives at the currency specialist Record revealed they had taken 10% cuts to their pay.
Posted by admin | Posted on 11-06-2012
Category : Business
Tags: binding, cable, committee, companies, deal, group, investor, move, pay, remuneration, shareholder, the guardian, vote
WPP investors are poised to reject Sir Martin Sorrell’s pay deal, while minsters ignore shareholders’ concerns, says Labour
Labour has accused the government of failing to read the unprecedented mood among investors over spiralling executive pay as the business secretary, Vince Cable, signalled he is likely to row back on plans to give shareholders binding annual votes on remuneration.
The move comes as investors – on a war footing over boardroom pay – are expected to vote heavily against a controversial new pay deal for Sir Martin Sorrell, chief executive of the advertising group WPP, at an annual shareholder meeting in Dublin on Wednesday.
A defeat for the company would take the tally of FTSE 100 pay revolts in the same AGM season to an unprecedented three. Cairn Energy and Aviva saw angry investors outvote supporters of pay arrangements for top executives at heated shareholder meetings last month. Defeat for WPP would also take the number of revolts across UK listed companies to six – another record.
At present such votes are no more than a passing embarrassment for companies because directors are not required by law to reflect the views on pay of those who own the company.
On Sunday night the shadow business secretary, Chuka Umunna, said: “At a time when shareholders are becoming more assertive and activist in their approach, the government appears to be turning the other way, showing itself to be out of step with the tide of investor opinion.
“The prime minister said he wanted to empower shareholders, but has failed to stand up to vested interests and match these words with action. Instead of driving the change we need to see, he has fallen at the first hurdle.”
Cable is understood to be clinging on to plans to introduce a binding vote on pay, but is looking at a watered down approach where pay deals might go before investors every three years. The benefits of such a move have split governance groups, with the Association of British Insurers and Manifest seeing merits in a triennial vote, while Pirc advocates a yearly ballot on executive pay.
Moves to water down plans for a binding vote came as the latest clash over FTSE 100 executive pay took a new twist. WPP and its leading shareholders were blaming each other for derailing months of backroom talks that could have averted what is now universally expected to be a humiliating revolt.
A source close to WPP insisted blame for the failure to agree acceptable pay terms with major shareholders before Wednesday’s meeting lay not with the group’s remuneration committee but with certain rebel institutional investors. Specifically, the source pointed to a confidential proposal from committee chairman Jeffrey Rosen to bump up Sorrell’s salary by 50%, which was disclosed to the Guardian last September.
However, the suggestion that institutional investors are to blame for Rosen’s committee pushing through fiercely opposed pay plans was met with incredulity by shareholder groups. One well-informed source suggested Rosen had approached the consultation process last summer with a series of proposals he ought to have known would be met with widespread opposition.
Senior investors have let it be known that they feel Rosen’s final proposals, at the end of the consultation, failed to address outstanding concerns and that the first some knew about his controversial conclusions was when they read the annual report.
Sorrell’s response to a 42% protest vote on pay at WPP’s annual shareholder meeting last year was cited by Cable’s department as a prime example of “companies not responding adequately to shareholder concerns”. In response Sorrell reportedly played down the protest, suggesting: “This strikes me as being a matter of excessive micro-managing [on the part of WPP shareholders].”
Over the weekend, WPP chairman Philip Lader, who sits alongside Rosen on the five-person remuneration committee, told reporters he would redouble efforts to engage with shareholders after Wednesday’s meeting. Thought to hold sufficient proxy votes to know the outcome of the ballot, he said: “The board has the responsibility to exercise the best commercial judgment and we did so with careful extensive deliberation as we have sought to explain to shareholders … That said, while directors are expected to exercise their judgment, we’re also responsible to shareholders.”
Posted by admin | Posted on 08-06-2012
Category : Business
Tags: annual, bolland, executive, j sainsbury, news, package, received, remuneration, rise, sainsbury, salary, share, target, the guardian, worth
M&S’s Marc Bolland and Sainsbury’s Justin King both suffer bonus cuts as economic hard times lead to below-par results
The chief executives of Marks & Spencer and Sainsbury’s had their annual bonuses slashed last year – but still received bumper payouts – after the high-street downturn saw the retail groups miss key financial targets.
M&S boss Marc Bolland saw his pay package drop from £4.9m in 2011 to £2.5m after the retailer produced its first fall in annual profits in three years. Bolland will be able to make up some of that ground, however, because at the end of this week he is eligible for cash in shares worth £1.7m that were part of the “golden hello” agreed when he was poached from Morrisons in 2010. He could have collected as much as £3.9m, but is receiving a reduced payout after the retailer missed profit targets attached to the shares.
On top of a basic salary of £975,000, pension contributions and perks such as a car and driver, Bolland received a cash and shares bonus of £663,000, which was roughly a third of his full entitlement of up to 200% of salary. He failed to hit targets tied to profitability set at the start of the year, when analysts had pencilled in profits of £718m. In the end Britain’s biggest clothing retailer reported a 1% drop in underlying profits to £705.9m for the year to 31 March.
The economic downturn has resulted in several years of tough trading for retailers as Britons cut back spending on clothing and food. It has also exposed poor performance, with Tesco boss Philip Clarke turning down his annual bonus after the supermarket chain issued its first profit warning in 20 years.
Details of Bolland’s remuneration come amid a round of high-profile shareholder revolts over executive pay at companies ranging from Barclays to Inmarsat and Prudential in a phenomenon dubbed the “shareholder spring”. Investor resistance to big pay rises at underperforming firms have also led some executives, such as Aviva boss Andrew Moss, and Sly Bailey, head of newspaper group Trinity Mirror, to quit. WPP boss Sir Martin Sorrell is currently staring down his shareholders who are angry about the 60% pay rise he received last year.
At Sainsbury’s, Justin King banked a pay and shares package worth £3.9m, up from £3.2m in 2011, after a year in which profits rose 7% to £712m. King received £1.2m in salary and benefits as well as a £514,000 bonus but topped up his pay by cashing in share options worth £1.3m. The boss of Britain’s third largest grocer was also awarded shares worth £897,000, but they are locked away by the company for two years.
The terms of King’s pay package mean he can earn a cash bonus worth up to 125% of his annual salary of £920,000, but last year it was set at 56% after the remuneration committee judged that while profit came in on target, sales had been “below threshold”.
Its finance director, John Rogers, and Mike Coupe, the commercial director, were awarded cash bonuses at 42% of salary out of a maximum 90%. The company’s annual report said King had received a £20,000 pay rise at the start of the year, boosting his base salary to £940,000.
Sainsbury’s remuneration committee chairman, Bob Stack, said it had reviewed the grocer’s long-term incentive schemes during the year and changed the criteria, pegging success to key measures such as return on capital, cash generation, and achieving sales growth “more successfully than peers”.
In a nod to the shareholder climate, Stack said it had also introduced a “clawback” provision for future long-term incentive awards, which would be invoked for misdemeanours such as material misstatement of accounts, fraud or “serious misconduct”.
