Sorrell's $26 million payoff triggers shareholder rebellion

WPP faced tough questions about Sir Martin Sorrell's exit at its annual general meeting, with more than a quarter of WPP shareholders voting against his entitlement to a possible £20 million (US$26.75 million) payoff.

Despite resigning in April, Sorrell is entitled to shares that could be worth nearly that amount over the next five years if the company hits targets.

27% of investors voted against the remuneration report in a non-binding vote at the AGM in London and 15.5% voted against the re-election of chairman Roberto Quarta.

Once abstensions are included, 29.5% failed to back the remuneration report and 16.6% failed to back Quarta.

Some shareholders were unhappy that WPP treated Sorrell as a "good leaver" without revealing the personal misconduct allegations that led to his abrupt departure in April and that he had no "non-compete" clause, allowing him to quickly launch a new marketing services business, S4 Capital.

Quarta admitted that some shareholders found Sorrell's pay-off "unsatisfactory" but insisted the board had received legal advice that there was "no basis to cancel his [Sorrell's] entitlement to the share vesting over the next five years".

He said the company had also received "unequivocal legal advice that data protection law prohibits us" from disclosing the allegations against Sorrell, despite some investors' calls to make them public and media reports.

Questions have mounted in recent days after the Wall Street Journal reported that Sorrell paid a prostitute with company funds and the Financial Times went on to publish claims that Sorrell regularly took cash advances to pay for expenses, was seen entering a brothel and was sometimes rude to WPP parent company staff, particularly executive assistants.

Sorrell has denied the allegations of misconduct "unreservedly" and "strenuously" denied the Wall Street Journal's allegations.

Quarta conceded that "questions remain" about the allegations "but there is simply nothing further we can legally disclose".

He added the search for a new chief executive is "well advanced and moving ahead rapidly".

The mood was sombre at the Purcell Room in the South Bank Centre in London, as in the financial world, a protest vote of more than 20% is considered significant.

WPP is used to protests over Sorrell’s pay with 21% of shareholders opposing his £48 million (US$64.3 million) package a year ago and 33% voting against his £70m (US$93.8 million) payout in 2016.

WPP's performance has deteriorated in the last 18 months and its share price has fallen by a third.

Sorrell received no short-term bonus last year but still earned £14 million (US$18.75 million), including a £10m (US$13.4 million) long-term bonus.

At the AGM WPP reported its revenue growth less pass-through costs was "up marginally" in the first four months, which was "a slight improvement" on the first quarter.