WPP shareholders revolt over pay following Sir Martin Sorrell's departure - as it happened

Time for a recap, as shareholders stream home:

Advertising giant WPP has faced irate investors at its AGM, two months after CEO Sir Martin Sorrell suddenly quit amid allegations of improper conduct.

Nearly 30% of investors failed to back WPP’s remuneration report -- a tried and trusted method for City bigwigs to chastise errant company boards. There was also a smaller protest at chairman Roberto Quarta, with 17% of investors declining to approve his re-election to the board.

WPP may judge that this could have been worse; the company is no stranger to pay revolts, thanks to the whopping awards handed to Sorrell in former years.

Sorrell’s shock departure, and subsequent allegations of paying sex workers in petty cash and bullying junior WPP staff, loomed over the AGM at London’s South Bank.

Quarta defended WPP’s handling of the issue, saying Sorrell was treated like any other colleague when allegations were first made.

Quarta insisted that data protection rules simply prevented WPP saying any more about the issue.

In an attempt to shut discussions down, Quarta declared:

I know that questions remain, but there is really and simply nothing further we can legally disclose.”

He also defended WPP’s decision to allow Sorrell to leave with stock options worth around £20m. The company’s legal advice was that Sorrell could only lose the awards if he was guilty of ‘gross misconduct’.

Quarta also suggested that WPP understands it has a problem; the company has now launched a review of its policies.

Everyone deserves to be treated with respect, he declared -- which really ought to go without saying...

Shareholders at the packed AGM appeared split. One suggested that Sorrell deserved to lose the money because he was setting up a potential rival to WPP (S4).

But another small investor claimed that the allegations facing Sorrell (which he denies!)were “entirely immaterial”

[reminder, the FT claims he was spotted visiting a Mayfair brothel, and gave some junior staff a thoroughly miserable time].

Shareholders also challenged WPP over its pay scheme -- there was anger that the next CEO’s bonus could be eight times their basic pay.

The company was also criticised for launching a share buyback scheme, as the share prices has fallen sharply in the last year.

CO-COO Mark Read also looked to the future, saying WPP could survive without its founder, and needed a new ‘beating heart”.

Chief transformation officer Lindsay Pattison says there are plenty of suitable internal candidates:

Here’s our news story on the AGM:

That’s probably all for today. Thanks for reading and commenting. GW

WPP shareholders have had their say, so we’re onto voting on this year’s resolutions.

Of course, we already know that nearly 30% investors have rebelled over the pay report - as WPP released the ‘proxy’ votes at the start of the AGM.

The final voting numbers could be slightly different, and will be released this afternoon.

That’s the end of the AGM. Shareholders are heading for refreshments, and reporters are trying to grab a word with the WPP top brass....

Another WPP investor asks an excellent question about WPP’s share buyback scheme

Q: How much cheaper would it be to have bought last year’s shares this year?

Finance director Paul Richardson says WPP could have saved $150m, or £100m! That’s because it paid between £15 and £16 per share. Today, shares are only worth £12.60.

Another shareholder has spotted that WPP’s annual report mentions a cyber attack. What happened, and what was the damage?

COO Mark Read says WPP fell victim to a cyber attack in June 2017, which initiated in Ukraine.

Read says WPP acted quickly by shutting down computer systems to prevent the virus infecting the whole company.

WPP was unable to quantify the impact, but reckons it lose between £100m and £150m of revenue (although some may have been clawed back in subsequent months).

Read says it was a “wake-up call” for WPP, and argues that the company did “remarkable well” under the circumstances.

I think this is the ‘Petya’ ransomware attack, which hit companies across the world last summer.

Another shareholder asks about the pay on offer to WPP’s next CEO under its new share incentive scheme.

Apparently s/he can earn up to eight times basic pay, if all performance targets are hit.

Shareholders aren’t happy! One shouts out that this is excessive.

Quarta has defended his position as chairman of two FTSE 100 companies (he also chairs medical group Smith & Nephew).

Quarta says he can definitely act as non-executive chairman of both (he’s currently filling an executive role at WPP)

Q: Do you accept that succession planning at WPP was inadequate?

Chairman Quarta says the company had made some preparations for life after Sorrell, but it simply didn’t have “visibility” on when its founder and CEO might step down.

Obviously it didn’t expect the events of recent weeks. But once Sorrell quit, WPP moved from “desktop planning to a pro-active period”.

[WPP executives Mark Read and Andrew Scott are currently sharing the COO role].

Q: Are the obscene remunerations paid by WPP in previous years now a thing of the past?

Quarta says WPP recently approved a new remuneration policy, which will determine what the next CEO is paid [back in 2016, Sorrell picked up £70m]

Q: Would Sorrell still have been granted ‘good leaver status’, if the board had been aware of the revelations about his (alleged) use of company money?

Chair Roberto Quarta says he isn’t in a position to comment.

Q: How will WPP cope without Sorrell?

COO Mark Read says Sorrell did a great job turning WPP into an advertising giant, but he thinks the business can succeed without him.

Read says WPP needs a new beating heart, who can make the company a place where men and women across the world want to work at [another hint that the company’s culture must change]

One private shareholder criticises Roberto Quatra for not opening the AGM with a tribute to Sir Martin Sorrell.

He’s disappointed that Sorrell has quit over “highly immaterial issues” (!!), and is happy that he has held onto his LTPI share awards.

He hopes that the former CEO enjoys a happy retirement, rather than turning his new company into a large peanut and fires it into “the rump of the WPP elephant”.

A few shareholders applaud in support.

After a brief discussion about advertising strategy, another shareholder brings the AGM back to the issue of its former CEO:

Q: Surely it is gross misconduct for Sorrell to launch a competitor? Can’t we pull the plug on his stock options now?

Chairman Roberto Quarta thinks not. He says Sorrell has described his new venture, S4, as a ‘peanut’, that couldn’t compete against a giant like WPP.

Quarta adds that WPP has “confidentiality clauses”, and he’s sure that Sorrell wouldn’t want to jeopardise his share options by breaching them.

The pay revolt at WPP is big, but it could have been bigger...

Here’s some instant reaction:

Onto shareholder questions.

The first comes from Hermes Equity Ownership Services, who say WPP’s board has become “more effective” since Roberto Quarta became chairman in 2015.

But Hermes are still unhappy about the lack of transparency around WPP’s pay arrangements (which resulted in Sorrell leaving with £20m of options)

Q: What will be the priorities for the new CEO?

Quarta says Sorrell’s successor must provide strong leadership, a good grasp of technology, and have great client skills.

Boom! Nearly 30% of WPP shareholders have failed to approve this year’s pay report.

That’s a bloody nose for the advertising giant, as investors show their displeasure over the £19m of share options which Sir Martin Sorrell left with.

Including abstentions, just 70.5% of investors voted to approve the remuneration report, with 29.5% failing to back it.

There’s also a smaller rebellion against the chairman, with only 83% of investors voting in favour of Roberto Quarta’s re-election.

WPP COO Mark Read is now speaking about the business now, saying the company hopes to do well at the Cannes Lions festival next week.

Read also touches on the challenges facing the group, with data and technology are increasingly part of the future.

Read also touches on the cultural issues at WPP, saying:

We need an inclusive culture for our people. That is what is most critical to us.

Chairman Quarta tries to direct shareholders’ attention to the future, saying that the process of appointing a new CEO is well advanced.

Chairman Roberto Quarta now turns to the allegations of workplace bullying published by the FT this week.

Everyone is entitled to be “treated with respect”, Quarta says. Everyone at WPP should feel able to raise concerns and to have them listened and acted upon.

We take this very seriously, and have asked the new management team to review how policies are put into practice, and to identify where improvements are needed.

Quarta now turns to the £19m of stock options which Sir Martin Sorrell left with in April.

WPP received “very clear” legal advice that there was no basis to cancelling Sorrell’s entitlement to shares which were due to vest in the next five years, Quarta says.

He accepts that some shareholders find the share award scheme unsatisfactory.

The only way Sorrell could have lost the awards were if “gross misconduct” could be established, Quarta continues, and the board had received very clear legal advice that it could not.

Quarta turns to the resignation of Sir Martin Sorrell, following an allegation of personal misconduct.

He says WPP took a “robust” approach to the allegations, treating him “just like any other employee would have been treated”.

We confirmed that the matter was wholly financially immaterial to WPP, says Quarta.

We understand that some people would like more details, but data protection law prohibits us from releasing more information, he insists.

Quarta continues:

We take this responsibility very very seriously indeed... There is really and simply nothing we can legally disclose.