Sir Martin Sorrell defends leaders’ pay rises

Sir Martin Sorrell has an impressive if sometimes controversial business career. His robust defense of his 70% pay rise captures his leadership style

Harvard educated Sir Martin Sorrell has been a candidate for a LWD leadership post for some while. He appeared on the radar screen again, as I caught the end of a BBC interview in which he justifies his most recent earnings rise of 70% last year.

His broadcast performance was consistent with that of an earlier interview [2009], suggesting a leader who was both tough and successful.

Sir Martin Sorrell is the chief executive of WPP, the company he founded in 1986, which is now the world’s largest group of advertising, marketing and communications companies. Widely regarded as one of the most important figures in his field, he recently joined Evan Davis on Radio 4’s business discussion programme The Bottom Line. He shared his vision about the future of advertising, the benefits of scale, why tough love means you sometimes have to bite the bullet and reduce your headcount, and how long the present financial crisis may last.

His 2009 predictions turned out to be rather refuted by events. However, that is largely true for other distinguished leaders in these turbulent times. There is an interesting parallel in his admiration of Rupert Murdoch with the comments made later by Tony Blair in his memoires. These endorsements of the tycoon’s achievements help us avoid the ‘hero to zero’ mentality which can be found in much of popular leadership narratives.

Furthermore, most pundits did not get close to anticipating the aftershocks of the credit crunch emerging in 2008.

Rupert understands…

Somebody like Rupert Murdoch understands that he’s not just in the TV business or the film business. He understands he’s in the communications business. Rather like Theodore Levitt used to talk about the buggy whip industry. They’re not in the horse and buggy industry. They’re in the transport industry. And when the railroads came in, they were threatened; but if you thought about it as being the transport industry, you won.
Rupert understands that. He’s in film, he’s in TV, he’s in outdoor sites in Russia. He’s spread his empire around the world.

“A recovery of sorts”

“The first half of 2009 will be very tough – I think the second half of 2009 will get relatively better. Relative to the first half.
And I think in 2010 we will get a recovery – what we called in a recent statement a recovery of sorts “.

Tough love

Sir Martin’s career has been hugely successful and his success has been rewarded with honours and wealth. He takes risks and cuts his losses when they occur. In the interview he also talked about ‘tough love’ and the benefits of ‘letting people go’ however painful the decision. (Although he didn’t seem too pained, it seemed to me).

The Daily Mail, a popularist tabloid newspaper, was unconvinced about Sir Martin’s case. In an article hostile to his lifestyle The Mail noted:

My pay is very low, moans advertising tycoon with a basic salary of £1 MILLION a year

Sir Martin, 66, said his bumper income, which rose by 83 per cent to £4.2million last year, was fully justified and was mostly linked to the firm’s performance. He added that he considered his basic salary, of just over £1million, to be ‘very low’.

The juicy details

The article also replicated much that can be found on wikipedia on juicy details of his high-profile divorce which has arguably contributed to his celebrity profile, albeit for non-business matters.

Acknowledgements

To the website Short Person’s Support for the image of Sir Martin. The site also offers the following quotable quote:

Aunt Vorthys: “A nice young man … A pity he’s so short.”
Lady Ekaterin: “He’s not so short … He’s just concentrated”

[Lois McMaster Bujold, in Komarr]

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5 Responses to Sir Martin Sorrell defends leaders’ pay rises

  1. Paul Hinks says:

    Hi Tudor –

    Perhaps naively I wasn’t completely familiar with the personality and background of Sir Martin Sorrell – a quick search around the internet reveal his impressive credentials – I’ll look forward to researching & learning more about him.

    My reply wasn’t specifically about Sir Martin as an individual – but more generally about those who receive very high pay.

    I feel a disconnect with the figures that these folks earn (often multiple £million per annum) – I feel the same way about footballers & city bankers.

    I do recognise some of these folks are very talented, very capable individuals, and I believe it’s correct to offer incentives to recognise & reward their contribution – but are these ‘untouchables’ really worthy of pay that is so much higher than their colleagues working elsewhere in their organisation?

    Furthermore, are the tactics used to help boost the performace of the firm ethically correct? Mark Hurd employed a tactic when CEO of HP that mandated a 10% pay cuts to boost the performance of the firm – he hit his performance targets and received his multi-million dollor bonus – I’d suggest this was a great way for him to line his pockets, but also break trust with his workforce!

    More confusing are the huge payoffs that are made when an organisation decides to part company with its CEO or chairman, for example: Leo Apotheker, Mark Hurd or Sir Fred Goodwin – quite amazing figures of compensation.

    I suppose nice work if you can get it.

  2. Thanks Paul

    Welcome to the murky world of executive remuneration. There is a lot of received wisdom out there about added value, leadership contribution, and ‘getting the best out of the workforce’.

    The debate is further muddied by treating high rewards as inherently bad (or good) while attempts to contextualize just fail to resolve the various dilemmas of ethics and economics.

    Do you know the financialization work of Karel Williams and his group at MBS?

  3. Paul Hinks says:

    Hi Tudor –

    Thanks for the reply back …

    I wasn’t familiar with the work of Karel Williams – I’ll be sure to take a look – thanks for the suggestion.

  4. Suggest you start with Julie Froud, Karel Williams et al., Financialization and Strategy, Routledge. Best wishes. TR

  5. Paul Hinks says:

    Many thanks Tudor – appreciated.

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