Wednesday, 6 June 2012

WPP smash up

The first thing I think we can say about WPP is that it's likely that it will lose the vote on it's remuneration report. I'm struggling to find anyone who says they're voting in favour. Also all the proxy advisers Appear to have recommended an oppose, with the ABI red-topping it. So this one could go down in flames.

Secondly, there seems to be no desire to avoid this outcome. I think shareholders have already dug in on this one but, perhaps more surprising to some, the company isn't giving ground either. Martin Sorrell's comment piece in the FT has only cranked up the pressure, giving no indication he believes the company has done anything wrong.

In fact what is notable about his article is the emphasis he puts on the role of ISS. You would never get the impression that asset managers are ticked off, just those pesky proxy advisers. This may provide some indication of how WPP will respond to the result. It would also be in line with the corporate lobby's agenda at the moment. There's even a bit of speculation that WPP may delist from the LSE if it gets spanked, which would be a bit puerile, but hey.

So maybe a defeat over remuneration at this AGM suits a number of different parties. Shareholders can show Vince Cable another scalp. More importantly it will be one at a company that isn't under performing or where there are concerns about the leadership. This is about when to say "enough". From Sorrell's perspective it's also about shareholders saying "enough", but how ludicrous that is when the business is successful. And just as there are those willing shareholders on, there are also those who want WPP stand firm, and see all this executive pay stuff as dangerous populism.

How people respond to a defeat will be interesting, since the dominant idea in corporate governance is that it is shareholders who are best placed to deal with top pay. Will anyone within the corporate world argue publicly that things are getting out of hand? It would lead to more questions if they did, and could lay bare how real the notional commitment to shareholder primacy is, but I wouldn't rule it out.

Finally, since the vote on the remuneration report is advisory, will WPP actually do anything to address it? Again it could be quite inflammatory if they don't (or if they do something more ridiculous). But it would also strengthen the argument for a binding vote.

It's very nicely set up for a proper scrap.

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