“It’s not a bonus, it’s an incentive plan. It’s based on the performance of the company and if the company did not perform well, we wouldn’t get it,” says WPP’s Sir Martin Sorrell rather testily at Dubai’s Atlantis Hotel, hours after news broke that he would be receiving one of the biggest chief executive cheques in history.
“The result is no surprise if we perform at the top for five years, which we have done,” he continues. “There are two things that have driven it: one is the performance of the company and two is the share price. The share price has doubled between five years ago, so the market capitalisation has gone from $14 billion to $30 billion. So you can look at the figure and say that’s a large figure, but two things have happened; the company has performed above seven or eight of the top comparators and the second thing is that the share price itself has risen. What was allocated five years ago has doubled in value.”
The figure to which he refers would be $100 million – the value of the pay cheque Sorrell will probably be carrying to the bank very soon. The large portion of this is his $86 million share of WPP’s long-term bonus scheme. When added to his salary and annual bonuses, this will be the second largest single pay packet given to a CEO after Reckitt Benckiser’s Bart Becht in 2009. Given the general British aversion to discussing money and the fact he has already been door-stepped twice by journalists in relation to this, Sorrell is understandably unhappy with our turn of conversation.
Nevertheless this is far from the first time the CEO of the world’s largest advertising group has had to answer questions about his pay, with revolts occurring last year and in 2012 by investors disgruntled by Sorrell’s hefty slice. Asked whether he expects any more backlash following the latest announcement, he says: “We’ll see, but investors have been aware of it for five years and they voted the plan in, so they knew what the potential outcomes were. If the company was less successful, the amounts wouldn’t be paid and the share price would be much lower. What we have done is create value.”
Sorrell isn’t wrong. In the space of 30 years WPP’s worth has grown from $1.4 million to nearly $30 billion. Last year, the group added another 44 agencies to its ever-expanding global empire, including the digital outfits Essence and the Exchange Lab. And to use Sorrell’s phrasing, this year WPP is ‘off to the races quite rapidly’, having acquired another 16 agencies in the first two months of 2016 alone. So why has this strategy become such a priority for WPP?
One of the reasons Sorrell cites is “horizontality” or “getting people to work together for the benefit of the client”, a strategy that has led to some of their pitch-winning group efforts regionally, including Suez Canal in Egypt and more recently Emirates’ global branding and creative account. He adds: “You can’t make acquisitions for that other than to supplement for the areas that you don’t have.” Meanwhile, the group will be increasing its focus on fast-growth markets rather than those already matured, of which the Middle East and North Africa will play a vital role. In fact , it’s hoped these fast-growing markets will account for up to 45 per cent of the group’s overall business over the coming years, according to Sorrell. And as the acquisitions of Essence and Exchange Lab have shown, digital and data analytics rank high on WPP’s agenda, alongside content operations through investment in Vice and Media Rights Capital, the developer of Netflix’s iconic show House of Cards. “It’s on series four now,” Sorrell informs me.
Meanwhile closer to home, the regional network was under the spotlight last year for different reasons as the media agencies Mindshare, MEC, MediaCom, and BPG Maxus were all merged into GroupM under the leadership of Filip Jabbour. Months later, MediaCom’s CEO Nick Barron left the company in circumstances that still remain a mystery, though Sorrell insists it had nothing to do with the loss of Etihad, the agency’s biggest account. “It was just internal changes at MediaCom. If someone leaves the company, there is a good reason for it. So the change was made. It wasn’t related to any specific thing; it was just a general review that a change should be made,” is all he will say on the matter.
On the subject of GroupM, however, the CEO is much more enthusiastic, especially when comparing its fortunes to the group’s rival Publicis Groupe. “Having been separate agencies over the last few years, it’s going to become more of a GroupM integrated operation. It’s very different though. Publicis in America has just announced a re-organisation, which I don’t really understand. They have brand officers; they are not called CEOs. We have four strong, or six strong, units and obviously we leverage media buying, analytics, digital. But their structure, which I think they are calling Publicis Media, I think causes issues from a conflict point of view because if you bring things too close together then you’re going to have conflict. So I think that our structure is pretty good and because we don’t do it by dictate, we do it by evolution over a significant period of time, which is very important.” He adds: “It’s about getting people to understand what’s happening in the market place over a significant period of time. But using our mind power in the region is important.”
Sorrell cannot help but mention the rival giant’s recent misfortune when its agency Mediavest lost a $900 million account with supermarket giant Walmart. Comparing the latest media reviews, in which WPP grew its billings by nearly $2 billion as Publicis’ fell by $3.5 billion, Sorrell says: “Why did we do well in the reviews? Well I think we’ve got good talent and I think we priced effectively. We made price commitments we can make and not rash promises. When competition gets desperate, I remember one of our clients when asked ‘What keeps you awake at night?’ said ‘challenge competitors that are wounded or in difficult circumstances because they’re irrational’. So irrational competitors because they are under pressure. And we have seen that in our industry, those companies that are under heavy pressure, are losing business and people, tend to make rash promises they can’t keep.”
But will WPP themselves start to feel the pressure, especially in the Middle East, where low oil prices have hit the region’s economy and advertising spending has been predicted to fall by 10 per cent this year? The answer is, unsurprisingly, a resounding no, with Sorrell describing the current “volatility” and cost-focus as being a feature of life since 2011. Nevertheless, having established a base in Havana, Cuba, the company has already got its sights set on one of the most important markets to potentially emerge this year – a post-sanctions era Iran. However, the group is already behind rival Dentsu Aegis, which entered the Iran market early last year in partnership with International Communications Agency. The formalised partnership of Carat-ICA now has a base in Tehran and handles planning and buying for clients like Reebok, Dr. Wolff, Native Union and Telda.
However, as Sorrell states, the situation is more complicated than simply waiting for sanctions to lift. “We’re talking to a number of people in Iran at the moment,” he explains. “Now we are not subject to United States’ sanctions or licensing, we don’t have to get a US licence because we are a foreign company. But the banking sanctions we have to look at very closely. But we are talking to a large number in Iran and I expect we will do something shortly. The Iranians are very shrewd, so as the degree of interest is heightened in Iran, the pricing of opportunities has risen, but that was ever thus. So I think for all our brands in Iran in advertising, media, in data investment management. We’re already doing data work in Iran through other parts of the world, we’re already doing surveys you know.”
He adds: “I was at a Financial Times Iranian conference; it was a Euro monetarist, I think it was one of ours, who said the female cosmetic market is worth $4 billion and is predicted to get to $11 billion in a few years. The tourism industry is a massive opportunity; there are 657 hotels in Dubai and there are only about 16 hotels or whatever in Tehran and very few of them are four star, five star status. Air France and British Airways are now opening direct coverage to Tehran from Paris and London. There are healthcare and education opportunities (they are a highly literate population). So 83 million plus people – it’s the largest market to have really opened up since the fall on the Soviet Union or the (Berlin) Wall since the end of the Cold War. Cuba is 12 (million) now. So it’s really important.”
Does Sorrell, now aged 71, intend to see through the group’s Iranian aspirations or will he be taking his sizeable bonus for a cushy retirement? “Why would I throw the towel in?” he says, seemingly aghast at the thought. “Why would I want to comfortably retire? You know I am an at-will employee so I can be sacked now or I can choose to leave now. But I will carry on as long as people want me to carry on.”