Katherine Levy: While shareholders rise up, remember those who deliver
By Katherine Levy, campaignlive.co.uk, Thursday, 10 May 2012 08:00AM
The City is predicting that WPP shareholders will voice discontent with Sir Martin Sorrell's 2011 pay bump to £12.9 million at the group's AGM next month, as the "shareholder spring" takes the FTSE 100 companies by storm.
Scalps have already been claimed with the departure of the Aviva chief executive, Andrew Moss, and Sly Bailey from Trinity Mirror, as shareholders criticise company performance and chief executive pay. For Bailey, it was increasingly difficult to convince the owners of Trinity Mirror that her £1.7 million pay package for 2011 was appropriate, while the company reported a 40 per cent fall in pre-tax profits and hasn't paid a dividend since 2008.
But while revolt is in the air, there is an even more serious advance on the horizon: the Business Secretary Vince Cable's plans to introduce a binding vote for shareholders to veto executive pay increases. Cable's plans are concerning for many reasons, but the umbrella theme that holds them together is "lack of trust".
Of course, a balance has to be struck between the performance of a company and what its management is paid. But to give all the teeth to its shareholders will only seed resentment among those on the business front line and, at worse, destabilise the company they have a vested interest in. Yes, there are some who continue to be paid amply while their company sees its share value plummet, but as evidenced by the departures of Bailey and Moss, few want to sit tight aboard a ship manned by mutinous sailors.
But when a company is performing well, then shareholders must be prepared to reward success, even at eye-watering levels. Sorrell received a fat remuneration for last year's work - his salary was increased by 30 per cent and his total remuneration increased by 56 per cent year on year. However, nearly half of his total compensation was down to a long-term incentive scheme payout of £5.6 million. Sorrell earned a lot, but he also helped deliver record results for the marcoms empire he himself founded (revenue climbed to £10 billion). No-one can doubt that this is an impressive performance. And shouldn't bonuses be performance-related?
Aegis Group's chief executive, Jerry Buhlmann, is another media head who deserves his 2011 bonus (£600,000). He has stripped Aegis down into a more profitable, streamlined business focused on media and digital communications, and delivered £200 million to shareholders last year. The $3 billion global media planning and buying win for General Motors has also pushed it up the global pecking order.
There is a real danger that, as investors become more vociferous, we lose sight of how impressive it is to deliver profits and dividends in spite of the pervading austerity. If that doesn't deserve a bumper bonus, what does?
This article was first published on campaignlive.co.uk
- Senior Designer, Entertainment Sky Negotiable, London
- Creative Designer, 3D - Brand, Service and Product Innovation Bamboo Crowd £30,000 - £40,000, London (Central), London (Greater)
- Flame Artist - Visual Effects Sky Negotiable, London
- Innovation Director - Creative Direction & Design Management Bamboo Crowd £60k - £75k , London (Central)
- Sales Manager - Branded Content & programmatic solutions Ultimate Asset £30000 - £40000 per annum + commission & benefits, Manchester
- The man who made Grey matter
- Yorkshire Tea launches £5 million campaign
- Eric Cantona to swim Channel if Brits agree Kronenbourg 1664 is best beer
- Beacons installed on 500 London buses by Exterion Media
- MediaCom's Lisa Humphreys flies flag for media in '35 women under 35' list
- Asda brings back 'pocket tap' and adopts Walmart strap line in TV ad