A major WPP investor has raised the thorny issue of Sir Martin Sorrell’s successor, accusing the company’s board of a lack of transparency and calling for clarity on the process within a year.
Guy Jubb, head of governance and stewardship at Standard Life Investments, said that WPP’s “Sorrellcentricity” has created a perception among investors that its chief executive “dominates” board decisions.
“We have been concerned for some time by the perception that Sir Martin has the potential to dominate the board’s decision-taking and the processes associated therewith,” he said.
“These concerns have been amplified by not only Sir Martin’s compensation arrangements, which – for the avoidance of doubt – we oppose, but also the lack of transparency associated with the board’s approach to dealing with what the chairman describes as the succession elephant.”
Standard Life Investments manages 22m WPP shares on behalf of clients, giving it a 1.7% stake, and has been an investor in the group for almost of all of its 30-year life.
Jubb took the unusual step of attending his first-ever WPP annual meeting to voice his concerns, arguing that with Sorrell having just turned 70 that “time is increasingly pressing”.
“For now, we support the board’s position that Sir Martin is the right person to lead the company but we believe the board, including Sir Martin, has a responsibility to demonstrate with conviction how it is managing both the art and the science that is needed. The time to do this is increasingly pressing.”
Jubb challenged Roberto Quarta, who replaces Philip Lader as chairman following Tuesday’s annual meeting, to make succession his “number one governance prority” and to make sure investors are “given a clear and concise explanation by this time next year of how the board is doing so”.
Lader, who has addressed the issue several times in his letter in each WPP annual report, said that the board discusses “at length” succession twice a year in confidential meetings.
“There is a certain Sorrellcentricity but the everyday business of the company is run by 16 or 20 individuals who lead the various groups. Many of their groups if they were independent companies would be the natural place we would look for potential successors to Sir Martin.
“We believe the internal candidates who are reviewed regularly by our board in a very rigorous process are well-known. We do not list, as some industrial companies have in past, the three potential successors.
“It is entirely right calling for intense, rigorous succession planning … it has not been as transparent as you and others would like [but] I don’t apologise for it. It has been a matter of internal policy.”
Jeremy Rosen, the outgoing head of WPP’s remuneration committee, said that the company had a strong board with “no shrinking violets”.
“I’ve always felt very comfortable we have fulfilled our responsibilities to shareholders of what succession management might be under a variety of different scenarios,” he said.
When asked after the meeting if the board had allayed his concerns, Jubb said: “It was a fulsome response [which made] pretty clear there is room for improvement on transparency.”
