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WPP shareholders reject Sir Martin Sorrell's £6.8m pay report

"Message... was unambiguous and cannot be ignored," says one major shareholder

Fifty-nine and a half per cent of shareholders in the advertising firm WPP have rejected the £6.8m pay plan for its chief executive Martin Sorrell.  Twenty-one per cent of shareholders also voted against relection of Jeffrey Rosen, the chair of the company's compensation committee. Philip Lader, the chairman of the company, said that the board took the vote "seriously", adding "We’ll consult with many share owners and we’ll them move forward in the best interest of our share owners and our business." 

Sorrell had been awarded a 30 per cent rise in his basic salary, to £1.3m, but an additional change to the way bonuses are awarded at the company lifted the maximum payout to 500 per cent from 300 per cent. Sorrell was awarded a 385 per cent bonus for 2011, lifting his total salary to £6.8m (around £0.5m was allocated to neither bonus nor salary).

Defending his high pay, Sorrell highlighted the fact that he was returning cash to shareholders (the dividend payout ratio has reached 35 per cent) and that he had taken very little money out of the company, saying that "almost all" of his net worth was tied up in it. He also addressed criticisms of the company, telling shareholders that:

We’ve had a very strong new business run, we’ve had a number of major new team assignments in the last four to six weeks, and we are making some progress in consumer insight although the Euro crisis is becoming more concerning.

For the first four months of the year, WPP reported like for like sales up 4 per cent, with growth in BRIC markets up 14 per cent. Despite this, shareholders are resolute that their voice will be heard. Standard Life, one of the major shareholders who voted against Sorrell's pay, said:

The message from shareholders was unambiguous and cannot be ignored.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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A simple U-Turn may not be enough to get the Conservatives out of their tax credit mess

The Tories are in a mess over cuts to tax credits. But a mere U-Turn may not be enough to fix the problem. 

A spectre is haunting the Conservative party - the spectre of tax credit cuts. £4.4bn worth of cuts to the in-work benefits - which act as a top-up for lower-paid workers - will come into force in April 2016, the start of the next tax year - meaning around three million families will be £1,000 worse off. For most dual-earner families affected, that will be the equivalent of a one partner going without pay for an entire month.

The politics are obviously fairly toxic: as one Conservative MP remarked to me before the election, "show me 1,000 people in my constituency who would happily take a £1,000 pay cut, then we'll cut welfare". Small wonder that Boris Johnson is already making loud noises about the coming cuts, making his opposition to them a central plank of his 

Tory nerves were already jittery enough when the cuts were passed through the Commons - George Osborne had to personally reassure Conservative MPs that the cuts wouldn't result in the nightmarish picture being painted by Labour and the trades unions. Now that Johnson - and the Sun - have joined in the chorus of complaints.

There are a variety of ways the government could reverse or soften the cuts. The first is a straightforward U-Turn: but that would be politically embarrassing for Osborne, so it's highly unlikely. They could push back the implementation date - as one Conservative remarked - "whole industries have arranged their operations around tax credits now - we should give the care and hospitality sectors more time to prepare". Or they could adjust the taper rates - the point in your income  at which you start losing tax credits, taking away less from families. But the real problem for the Conservatives is that a mere U-Turn won't be enough to get them out of the mire. 

Why? Well, to offset the loss, Osborne announced the creation of a "national living wage", to be introduced at the same time as the cuts - of £7.20 an hour, up 70p from the current minimum wage.  In doing so, he effectively disbanded the Low Pay Commission -  the independent body that has been responsible for setting the national minimum wage since it was introduced by Tony Blair's government in 1998.  The LPC's board is made up of academics, trade unionists and employers - and their remit is to set a minimum wage that provides both a reasonable floor for workers without costing too many jobs.

Osborne's "living wage" fails at both counts. It is some way short of a genuine living wage - it is 70p short of where the living wage is today, and will likely be further off the pace by April 2016. But, as both business-owners and trade unionists increasingly fear, it is too high to operate as a legal minimum. (Remember that the campaign for a real Living Wage itself doesn't believe that the living wage should be the legal wage.) Trade union organisers from Usdaw - the shopworkers' union - and the GMB - which has a sizable presence in the hospitality sector -  both fear that the consequence of the wage hike will be reductions in jobs and hours as employers struggle to meet the new cost. Large shops and hotel chains will simply take the hit to their profit margins or raise prices a little. But smaller hotels and shops will cut back on hours and jobs. That will hit particularly hard in places like Cornwall, Devon, and Britain's coastal areas - all of which are, at the moment, overwhelmingly represented by Conservative MPs. 

The problem for the Conservatives is this: it's easy to work out a way of reversing the cuts to tax credits. It's not easy to see how Osborne could find a non-embarrassing way out of his erzatz living wage, which fails both as a market-friendly minimum and as a genuine living wage. A mere U-Turn may not be enough.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.