LONDON BRIEFING:AS WPP's Sir Martin Sorrell prepares to meet his critics at Dublin's Convention Centre today, yet more evidence has emerged of the widening gap between the lavish rewards enjoyed in the boardroom and the pay packets of ordinary employees.
A survey by the corporate governance group Manifest and the remuneration consultancy MMK showed FTSE 100 company bosses received an average pay rise of 12 per cent last year while employees got just 1 per cent. The median total remuneration of Britain’s top bosses rose by 10 per cent, taking it to £3.7 million – five times the increase in average earnings. And one in four FTSE chief executives received rises of more than 40 per cent. Performance related? Hardly – the FTSE 100 fell by 5 per cent last year.
The ongoing debate on executive pay has put boardroom earnings under scrutiny and on to the news agenda as never before, but still the lavish rewards earned by Britain’s bosses have the power to shock. The Manifest/MMK survey was, of course, accompanied by a league table of the highest earners and, while the names and the numbers are all too familiar, it’s worth repeating some of them. In pole position is Barclays’ Bob Diamond, with a package worth £20.9 million last year, followed by the man who’ll be centre-stage today, Sir Martin Sorrell, with £11.6 million. In third place, with £11.3 million, is David Brennan, the AstraZeneca boss who has just stepped down following pressure from investors unhappy with the group’s performance. The boss in 10th position, Pearson’s Dame Marjorie Scardino, got just short of £9 million.
Anyone expecting an apology from Sorrell at the WPP shareholder showdown will be sorely disappointed. The man dubbed the “pay-packet pugilist” by the Financial Times says he finds the controversy over his compensation “deeply disturbing” and complained that reports of shareholders lining up to give him a “bloody nose” were “wounding”.
Sorrell insists there is a huge difference between rewards for failure and performance-related pay: “WPP is not a public utility,” he said in a recent interview. “If the government or institutions believe pay is excessive, tax it. Do not fiddle with the market mechanism.”
Fighting talk from the boss of the world’s biggest advertising group but unlikely to impress a significant proportion of WPP shareholders. Some 40 per cent of them refused to back the remuneration report a year ago and that figure is expected to rise to perhaps 60 per cent this time. While the WPP board has said it will engage in consultations with investors on its remuneration policies after the annual meeting, it has given no indication that it will pay much heed to today’s protest vote. Nor does it have to – such shareholder polls are “advisory” and thus not binding on boards, which are free to ignore even majority decisions made by investors.
Business secretary Vince Cable, who has long talked tough on greed at the top, had proposed to make shareholder votes on pay and bonuses binding on boards, which would have gone a long way to tackling the culture of excessive rewards. But it seems his own proposal was rather less than binding: it now looks as though votes forcing boards into action on pay will be required only every three years, rather than annually. The unconvincing reason being put about for the climbdown is the extra paperwork yearly votes would require.
Every little helps, but not enough
Turning round a company of Tesco’s size was never going to be easy, but another quarter of falling sales reported by the group earlier this week underlines the scale of the task facing Britain’s biggest retailer.
Its overseas operation may be huge and, with the exception of Fresh Easy in the US, profitable, but it’s the performance of the core domestic business that really matters. British sales were down again, by 1.5 per cent excluding new space, with chief executive Phil Clarke bemoaning the plight of cash-strapped shoppers.
While it’s too early to expect any benefits to be flowing through from Clarke’s recently unveiled £1 billion store improvement programme, this lacklustre sales performance is disappointing. Things would have looked even worse had it not been for the huge amount of money-off coupons shoved at customers in an attempt to win back their business. Rivals engaged in the same tactics, of course, but it’s not a sustainable recovery strategy.
Meanwhile, as Clarke and his team rightly concentrate on the core business, some of the signs from overseas are not looking good: the troubled US operation, which has still to turn a profit, saw a sharp slowdown in sales growth over the quarter, from 12.3 per cent to 3.6 per cent.
Fiona Walsh writes for the Guardian newspaper in London
