News Column

Shareholders at WPP and RBS keep up pressure on pay

June 26, 2014

Juliette Garside and Julia Kollewe



Investors at two FTSE 100 companies yesterday joined the chorus of protests against excessive executive pay, with nearly 30% of shareholders at the advertising group WPP refusing to endorse a plan that allowed founder Sir Martin Sorrell to receive a pounds 30m windfall last year.

Meanwhile, the Royal Bank of Scotland chairman, Sir Philip Hampton, was forced to defend the bank's bonus schemes, admitting: "Pay in the financial sector, particularly banks, got out of line with other sectors and more importantly the underlying performance of the business. Ultimately taxpayers picked up some of the bills for that."

The rebellion at WPP's annual shareholder meeting suggests that departing chairman Philip Lader has yet to quell a rebellion that began in 2012. In arrangements described by the advisory group Pirc as excessive, Sorrell is expected to collect nearly pounds 100m over the next three years in share awards from long-term schemes halted in 2012 but yet to expire. He will also be entitled to earn a maximum of pounds 19.3m a year in 2014 and 2015, under a scheme introduced last year.

In voting before the meeting at London's Shard more than 28% of shareholders rejected the 2013 pay plan or abstained, up from 26% in 2012. In a poll on the three-year pay policy introduced last year, the first binding vote under new city rules, 26% voted against or abstained. However, in order to pass a resolution, companies need a simple majority of votes cast, and WPP secured approval from nearly 82% of shareholders excluding abstentions.

"There have been some considerable concessions about executive remuneration at WPP over the last few years but the company still maintains a complex assortment of pay arrangements," said Pirc representative Andrew Whiley at the meeting. "Will the board consider making all of the variable pay arrangements much more simple, transparent, and easier for shareholders to get a handle on?"

Because WPP has not cancelled legacy pay schemes, which will make up the bulk of Sorrell's earnings in the coming years, Pirc argues that the company is running six plans, each with different rules.

Lader said: "We admit complexity but hope you see our commitment to transparency." He said axing earlier plans would be unfair and could raise legal issues.

Private shareholder Keith Jago took the floor at the meeting to say Sorrell's pounds 30m earnings last year were equivalent to pounds 24,000 for every working hour. He also questioned the chief executive's benefits.

At RBS's meeting at its Gogarburn headquarters on the outskirts of Edinburgh, all resolutions were passed after the UK government voted its 63% stake in favour. The Treasury had previously forced the state-owned bank to scrap plans to pay its bankers bonuses twice the size of their salaries, but nodded through plans to hand executives payouts of up to 100% of basic salary. RBS chief executive Ross McEwan is in line for pounds 1m a year in "share allowances".

This prompted shareholder Elaine McMillan to ask: "How do we get out of the spiral of all banks paying obscenely large bonuses and extremely large salaries?"

Hampton said RBS, which made an pounds 8.2bn loss last year, "had done more than most". Overall bonuses had come down by 60% in the last four years, and by 75% in investment banking. He insisted: "We have to have competitive pay structures."

Hampton warned of further branch closures as the popularity of online and mobile banking grows, but insisted that RBS, with 1,600 branches, would keep more branches than supermarket chains Asda and Sainsbury's combined (1,500). He later qualified his remarks, saying there was no floor.

Hampton refused to take sides on the Scottish independence issue but said RBS was considering the business implications of a yes vote. He noted it would take up to two years before Scotland became independent. During this time the UK would remain RBS's sovereign domicile.



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Source: Guardian (UK)


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