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Shareholder Spring: Sorrell Loses Pay Vote

(c) Sky News 2012

The boss of the world's biggest advertising company has become the sixth top chief executive this year to have their pay package rejected by investors as part of the so-called Shareholder Spring.

Sir Martin Sorrell's £13m compensation package - and the company's wider remuneration report - was rejected by 59.5% of shareholders at its AGM in Dublin.

The vote is non-binding but will likely force some sort of concession.

Chairman Philip Lader, a former White House deputy chief of staff, told the AGM: "We take the remuneration report vote very seriously.

"We'll consult with many share owners and will then move forward in the best interests of our share owners and our business."

Louise Rouse, director of engagement at investment campaigner FairPensions, who
attended the meeting, reacted by saying: "It is difficult to know whether the WPP (LSE: WPP.L - news) board underestimated the level of shareholder anger or simply chose to ignore it."

Sir Martin, who founded WPP in 1985, had defended the 56% increase for 2011 as a reward for "performance, not failure".

The group had just reported profits of £1bn for the first time.

But institutional investors argued the award was out of sync with the return on their investments, given the 15% fall in the group's share price over the 12 months.

Shareholder advisory groups, including the Association of British Insurers (ABI) and Pensions Investment Research Consultants (Pirc), urged members not to back the report, claiming the rewards were excessive.

They said the move was purely about pay and not Sir Martin, who they hold in the highest regard.

Writing in the Financial Times last week, he issued a robust defence of his pay, warning that if Britain wanted high achievers in the private sector, it needed to pay competitively.

He told the paper: "The compensation debate in the UK now seems to have shifted from undeserving bankers paid for failure and from payment for performance to what is fair pay."

Mr Lader had taken a more conciliatory approach ahead of the AGM and said all pay deals were open to further "deliberations".

Today's vote followed months of shareholder ire over executive pay, with the likes of Aviva (LSE: AV.L - news) , Trinity Mirror (LSE: TNI.L - news) , Barclays (LSE: BARC.L - news) , William Hill (Other OTC: WIMHF.PK - news) , Xstrata (Dusseldorf: XTR.DU - news) and Premier Foods (Xetra: A0B7GL - news) all facing significant votes against their pay reports.

Andrew Moss at Aviva and Trinity Mirror's Sly Bailey both resigned.

A report by proxy voting agency Manifest and remuneration consultancy MM&K suggested rewards for FTSE 100 (Euronext: VFTSE.NX - news) company bosses rose 12% to an average of £4.8m last year.

Sir Martin Sorrell came second in the report's list of best-paid bosses behind Barclays chief executive, Bob Diamond.

The Business Secretary Vince Cable, who is drawing up plans to give greater power to shareholders, is understood to be considering watering down proposals for a binding annual vote in favour of a poll every three years.

It had been feared that a binding annual vote would make investors less inclined to protest in case they destabilised management teams and would add to bureaucracy.