Martin Sorrell risks losing his multimillion pound exit package from WPP if he breaches a confidentiality agreement that restricts what he can tell other people about the advertising group and its operations.
Sir Martin did not have a non-compete agreement in his deal with WPP and last week unveiled plans for S4 Capital, a new marketing and communications venture, with backing from shareholders that include Jacob Rothschild.
However, the WPP board has been advised by its law firm, Slaughter and May, that Sir Martin would be in breach of his exit agreement if he imparted any of his extensive knowledge about the group while assembling his new company.
This would put his long-term incentive plan in jeopardy, according to people with knowledge of his employment contract.
Sir Martin was for many years among Britain’s best-paid chief executives, with a total package in 2015 of £70 million(€80 million ). His pay, calculated via four-year performance cycles, has fallen significantly since then, with his exit deal from the company thought to be worth less than £20 million.
The launch of his new venture, just six weeks after his departure from WPP following an investigation into an allegation of personal misconduct, has ruffled feathers at his former employer.
“The board is vigilant about this and the lawyers are going to be going through everything with a fine tooth comb,” said one person with knowledge of his contract.
WPP declined to comment. Sir Martin also declined to comment.
Sir Martin took control of WPP more than 30 years ago, turning the former maker of wire shopping baskets into the world’s largest advertising group by sales and acquiring some of the industry’s biggest names, such as Ogily & Mather.
He is injecting £40 million of his own funds into his new venture and raised an additional £11 million from other investors. He said last week that the new company would be a “multinational communication services business focused on growth”, adding that there were “significant opportunities for development in technology, data and content”.
WPP shareholders are still in the dark over the circumstances that led to Sir Martin’s departure from the company.
Glass Lewis, the shareholder advisory firm, has criticised the lack of disclosure and called on WPP investors to vote against the company’s pay report at its annual meeting next week. “Absent further information regarding Sir Martin’s retirement, we believe shareholders are unable to determine the extent to which he should be treated as a good leaver,” it said recently.
However, Institutional Shareholder Services, which advises big investors on how to vote at annual meetings, called on shareholders to back the re-election of Roberto Quarta, WPP’s chairman, at the meeting, despite acknowledging “a lack of transparency surrounding [ Sir Martin’s ]departure”.
“It is considered to be in the best interests of shareholders to have continuity in the leadership of the board at this time,” said ISS, the world’s largest proxy adviser.
Other large shareholders have also come out in support of Mr Quarta, including David Herro, deputy chairman at Harris Associates, the largest shareholder in WPP according to Thomson One, the data provider.
Copyright The Financial Times Limited 2018
