The WPP chairman, Roberto Quarta, faces a shareholder revolt over the departure of the former chief executive Sir Martin Sorrell, after influential advisory group Glass Lewis recommended that investors vote against his re-election at the advertising giant’s annual meeting next month.
In a report to investors, Glass Lewis said it had “severe reservations” about issues including the failure to publish the outcome of the investigation into personal misconduct that prompted Sorrell to resign – therefore classifying him as a “good leaver” keeping up to £20m in future share payouts intact – and poor succession planning.
Glass Lewis also recommended that investors reject WPP’s pay report, which saw Sorrell paid £14m last year, because of the lack of transparency around his departure.
The advisory body also criticised the way Quarta, who is also head of WPP’s nomination committee, has prepared in advance for life after the departure of the company’s founder after 33 years.
“We harbour concerns as to the transparency and efficacy of the succession process,” said Glass Lewis. “Despite previous assurances we believe the nomination committee has failed to adequately prepare for the replacement of Sir Martin. Our concerns are heightened by the opaque nature of the investigation into Sir Martin [and] his ‘good leaver’ status. Absent further information regarding Sir Martin’s retirement, we believe shareholders are unable to determine the extent to which he should be treated as a ‘good leaver’.”
WPP has always maintained that there has always been a number of potential internal candidates, including the WPP Digital chief, Mark Read, who is currently co-running the business on a day-to-day basis alongside colleague Andrew Scott, as well as a “constantly refined list of external candidates”.
Tim Armstrong, the head of Oath, the Verizon subsidiary that owns AOL and Yahoo, has been cited as a potential successor.
Glass Lewis also cited Quarta’s increased workload – he is also chairman of Smith & Nephew, the FTSE 100 medical equipment maker which has also recently had a change in chief executives – as unsatisfactory.
A spokesman for WPP said Sorrell has been “treated in accordance with his contract and also in accordance with the approved compensation policy and the stock plan rules”.
The spokesman added that a vote against Quarta was not in the interests of investors at a time when WPP has no chief executive, as some analysts argue that the best course of action is a £22bn-plus break-up of the ad group.
“Recommending a vote against Roberto Quarta is against the interests of investors at such an important time when the business needs stability until such time as a new chief executive is appointed,” said the WPP spokesman. “The investors have shown support for WPP by the share price rising by 18% since Sir Martin Sorrell’s retirement.”
