Shareholders in advertising giant WPP have voiced concern over the firm’s lack of a plan to replace Martin Sorrell as chief executive when he ultimately stands down from the role.
Standard Life Investments (SLI) and Royal London Asset Management (RLAM) believe WPP’s future success hinges on its ability to appoint a suitable replacement for Sorrell, who they believe is integral to the firm’s leading position.
The two asset managers are subsequently pushing for the firm to commit to a detailed succession plan.
SLI owns 19 million shares in WPP while RLAM holds 6.18 million – 1.5% and 0.48% of the share capital respectively.
In a statement on the media firm’s AGM which took place today, SLI governance and stewardship director Deborah Gilshan said the absence of a succession
plan remained “the key governance risk” to the asset manager’s long-term investment in WPP.
“As another annual meeting passes, the time to address succession for the CEO shortens and the necessity to do so becomes more pressing,” she added.
Gilshan said that SLI had attempted to engage with the WPP board on this issue for a number of years. In the statement, addressed to WPP chairman Roberto Quarta, she asked WPP to commit to reaching an agreement with Sorrell (pictured) over a “sufficient” lead time for appointing his successor.
“In our opinion, this increases the likelihood of a seamless succession as it would allow the board to execute their succession plans effectively and would reduce further the risk profile of the company,” she added.
RLAM also acknowledged Sorrell’s influence in making WPP a “media powerhouse” but raised concern over how the business will look when he retires.
RLAM corporate governance manager Ashley Hamilton Claxton said planning for succession was the biggest risk facing the company, adding work still needed to be done to assure shareholders of an orderly and stable transition when Sorrell steps down.
“Together with other investors, including Standard Life, we have pressed the chairman into making real progress with succession planning,” she added. “We are pleased that the board is taking this task seriously, by conducting more rigorous sourcing of potential internal candidates from group companies.”
A fifth of WPP shareholders opposed Sorrell’s £48m pay package at today’s AGM, with 21.3% either voting against or abstaining.
Earlier today, WPP issued a trading update in which it announced reported revenue for first four months up 15.9% at £4.846bn.
