Amid a growing backlash from the new British prime minister, the City and among financial institutions over executive pay and bonuses, Sir Martin Sorrell has remained completely unapologetic for his £70 million (Dh336.5m) package – as well he may, given the performance of WPP, the advertising conglomerate he founded nearly 40 years ago.
Last week, WPP shares hit a record high as it shrugged off the effects of the Brexit vote in its home UK market to beat all the forecasts with a rise in revenue of nearly 12 per cent in the first six months of the year.
WPP shares have now risen by 50 per cent since the vote and are up 10-fold since the 2008 banking crisis, and just seem to keep motoring, whatever is happening in the world economy. “Overall we’ve done pretty well,” says Mr Sorrell, modestly, “particularly in winning new business”. The prospects for the second half of 2016, he says, “look pretty good too”. Even the most bullish analysts were caught by surprise, a rare event on the upside these days when so many companies disappoint other way. In this case, one City analyst, in amazed tones, called it “a genuine positive surprise – and you don’t get those very often”.
In June, a third of WPP shareholders rebelled against Mr Sorrell’s package, the biggest ever awarded to a British executive (he earned £40m the year before), but given the results, he is in safe territory.
“Because 90 per cent of my compensation is in shares, when we do well as a company I do well,” Mr Sorrell said. “I am not a Johnny-come-lately. I have helped build the company from a £1m business 30 years ago to a $30 billion business now. People forget that in market capitalisation terms we are 50 per cent bigger than Omnicom.”
That’s the point. There would be no WPP without Martin Sorrell. He is not exactly the owner of it, but he is the creator of it. It was he who broke away from Saatchi & Saatchi, where he was the finance director, to take over a little shell company called Wire Plastic Products (basically supermarket baskets) and used it to take over the mighty J Walter Thompson and then Ogilvy & Mather, two of the great names in the industry.
Since then he has barely put a foot wrong and today WPP is the biggest advertising company in the world. Why would he do all of that for a pint-size package?
Mr Sorrell has always made a point of distinguishing between behaving as an owner rather than manager. “I thought that was the object of the exercise,” he says. So many chief executives take over an existing business, run it for five years or so and all too often depart with a handsome fortune, leaving behind a company that is often worse off than when it started. Marks & Spencer, for example, has now had five chief executives in a row who have presided over diminishing profit and market share, yet have walked away as wealthy men, their reputations barely tarnished. The same is true of BP, most of the big banks and just about all the retailers.
Mr Sorrell has kept going, pursuing a crystal-clear strategy, which has been to create the first genuinely global media business offering every kind of marketing service, from advertising to PR, to its international clients. He embraced the internet age, which has created a bloodbath among other media companies, and thrived in it, and now has to cope with the post-Brexit world that poses a whole set of new problems.
His triumphant week contrasted sharply with the events surrounding his old Saatchi colleague Lord (Tim) Bell, who suddenly announced his departure “with immediate effect” from Bell Pottinger, the PR firm he bought out from Chime Communications (now jointly owned by WPP) only last year. “I’m not sure his views on how the company should grow were in line with how a modern integrated agency needs to run,” said one employee.
That’s exactly what Mr Sorrell, who never got on with the more flamboyant Mr Bell, did get right. And why he deserves his pay package.
Ivan Fallon is a former business editor of The Sunday Times.