WPP Builds Succession Plan For £70m Sorrell

The world’s biggest marketing services company has identified external candidates who could eventually succeed Sir Martin Sorrell, it will say on Friday as it confirms that he received the second-biggest payday in history for the boss of a UK-listed company.

Sky News understands that WPP Group’s annual report will contain the most explicit comments to date about succession planning for Sir Martin, who has run the business since taking the helm exactly 30 years ago.

Roberto Quarta, the industrialist who became chairman of WPP (LSE: WPP.L - news) last year, is understood to have intensified a formal process to identify potential chief executives of the company, reflecting a desire among some City investors for greater clarity about the company’s plans for life after Sir Martin.

The WPP chief, who is 71 and undertakes a famously intensive schedule of international travel across its global network, has no intention of retiring.

However, Mr Quarta is said to be planning to inform investors in the annual report that it has now begun to identify potential successors to Sir Martin both inside and outside the company.

One of Britain’s most respected and recognised businessmen, Sir Martin has assembled a corporate empire housing prominent names such as the advertising network Ogilvy, the market research group TNS and the digital agency AKQA.

The most closely watched aspect of WPP’s annual report is likely to be its section on boardroom pay, with Sir Martin expected to have been awarded a total package for 2015 of just over £70m.

The vast majority of that will be from a long-term incentive scheme called Leap, which was approved by a majority of WPP shareholders in 2009 but which is being phased out after subsequent investor feedback.

The Leap performance period of 2011 to 2015 produced a 98% surge in WPP’s share price, compared to a rise in the FTSE-100 index of just 5.8%.

Some investors have grumbled privately about Sir Martin’s huge pay deals while supporting resolutions on remuneration because of the consistent rise in dividend payouts that they have enjoyed.

This week, the WPP chief again defended his remuneration, saying that he made no apology for the company’s continued success.

Sir Martin’s pay deal is nevertheless a sensitive issue - despite WPP’s record performance in 2015 - because of the hardening mood in the City to multimillion pound packages for public company bosses.

On Thursday, Weir Group (Other OTC: WEIGF - news) , an oil and gas engineering firm, saw more than 70% of investors vote down its forward-looking pay policy over its plans to award share bonuses with no link to the company’s performance.

Shire (Xetra: S7E.DE - news) , the pharmaceuticals group, won an advisory vote on last year’s pay package for chief executive Flemming Orskov by the narrowest of margins.

In recent weeks, BP and Smith & Nephew (LSE: SN.L - news) have been among the FTSE-100 companies which have witnessed humiliating pay rebellions.

Under WPP’s new executive pay scheme, which will kick in in 2018, the maximum potential payout to Sir Martin will be reduced to roughly £20m each year.

WPP declined to comment on the content of its annual report on Thursday night.