The pay of Martin Sorrell's employees has gone down while his has continued to soar
The advertising and marketing firm WPP approved the £43 million pay package awarded to Chief Executive Sir Martin Sorrell in 2014 at its AGM yesterday, despite 22 per cent of shareholders (an unusually high number) failing to endorse the deal.
It’s a ludicrous pay package for a number of reasons. Sorrell is undoubtedly a capable business leader and has achieved great success in building WPP into a global advertising giant since taking over the business in the mid-1980s.
But with a net worth of over £300 million according to the Sunday Times rich list, he has already been amply rewarded for developing the company over the longer term.
WPP now employs over 100,000 people. This is testimony to Sorrell’s success, but also suggests that the continuing growth of the company is not solely down to his individual brilliance.
While Sorrell’s pay leapt nearly 50 per cent from a mere £29 million in 2013, the pay of the average WPP employee, actually fell slightly, from £39,900 to £38,500.
If pay is intended to reward and/or incentivise excellent performance and to retain key staff, it’s also difficult to fathom the logic behind an award of £43 million. Does somebody already worth £300 million really need this kind of money to get them out of bed?
Would Sorrell feel so de-motivated, demoralised and under-appreciated that he just wouldn’t bother if he was paid any less? Even if so, the dependency of a company employing over 100,000 people on a single individual indicates a major failure in terms of staff development and succession planning as much as the genius of the person in question.
Unfortunately, this is exactly what a lot of people involved in the executive pay-setting process think, not least because they have a vested interest in doing so. Research from the TUC found that over a third of the remuneration committee members that set executive pay at FTSE 100 companies are themselves executives of other companies.
Thus, it’s hardly surprising that they believe the senior management team is the be-all and end-all of a company, and that the leading directors deserve to be paid millions.
Similarly, it is the well-paid investment fund managers who control the shareholder votes on pay at company AGMs, not the ordinary people with a pension plan or an ISA whose money the fund managers invest.
So the ‘going rate’ for executive pay is set by something closer to a cartel than a fair and functioning market, with those lucky enough to be in on the racket bidding their own pay up while holding down wages for their employees.
The net result is a steadily widening gap between the super-rich and everybody else (tempered, perhaps only briefly, by the global financial crisis), with all sorts of potentially de-stabilising social and economic consequences.
(IFS)
This certainly isn’t a state of affairs that anyone who believes in the free market should feel compelled to support, but in the aftermath of the election result, there is a real danger that it will be seen as ‘anti-aspirational’ to talk about the economic power of the super-rich and their ability to capture an undeserved and disproportionate share of pay and incomes.
However, if we believe in a sustainable economy that rewards people fairly and effectively for the work that they do, a bit of outrage at a £43 million pay package is entirely appropriate.
Luke Hildyard is deputy director of the High Pay Centre. Follow him on Twitter
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17 Responses to “Does a rich list CEO really need another £43 million?”
Torybushhug
About 3 years ago on Radio 4’s ‘Desert Island Disks’ he repeatedly said “I have no interest in money”, and of course Kirsty Young failed to challenge this. At the time a strong Labour Man. Can always rely on a lefty to chose to hoard far more wealth than they need to be comfortable and then disguise this with the tried and tested virtue signalling ‘I believe passionately in re-distribution’ narrative.
Torybushhug
I agree these sorts of pay awards are disgusting but I also ask people to be a bit more sceptical of very highly paid left wing stage comedians, actors and other ‘treasures’, whilst the pay of their make up girl or stage hand is a pittance. Please do not let a Saintly narrative dislodge your forensic scepticism. If someone purports to be passionate about meaningful re-distribution, why are they choosing to hoard a massive slice of wealth? What is a compassionate narrative without meaningful leadership by example?
Jacko
It’s odd how there are never any articles criticizing what pop stars, actors and footballers earn. But I’m guessing that’s because you perceive value in what those people produce, whereas you don’t perceive value in what business leaders produce because you fundamentally don’t really know or understand what that is.
But then why should you? Your average lefty works in the public sector, academia, charity sector, or the arts. Their degrees are not in business studies, economics, or numerate disciplines like maths but are in pyschology, sociology, history, media, politics, english, etc. Many of them have never spent a single working day in a commercial enterprise. Hardly surprising that to them business leaders are just boring men in suits who earn too much.
Take Luke Hildyard, for example. His background is at the Institute of Public Policy Research, local government, and think tanks, and the High Pay Unit. Does he really have any understanding of the private sector, let alone what CEOs actually do? No. He’s simply approaching this subject with a preformed belief that some people earn ‘too much’ and should earn less. Cue story.
I don’t even think most people care what others earn, because they understand that the way to earn more is to increase their skillset and persue their own career, not bleat on about what others have. That will get you nowhere in life. Only a loser blames others for his station in life.
blarg1987
There is a big difference. These people manage PLC’s which involves our money, in the form of shares which are invested usually through our pensions.
It is right to criticise these people if they have a 50% pay rise but they have not improved the value of the company by 50% and only done it on the back of other people.
Footballers, pop stars are usually people who do not control our money. While talking about PLC’s is likely to encourage a larger audience tot kae action such as write to their fund manager and ask them to reject said pay offers, etc.
Matthew Blott
I agree, they all earn too much but I would at least concede in the case of a world class footballer there are only a few people on the planet capable of doing the job whereas bankers and CEOs of already successful companies are more easily replaced.