Anthony Hilton: Sir Martin Sorrell proves he's worth his £43m pay packet

Wisdom: WPP boss Sir Martin Sorrell

Anthony Devlin/PA

8 March 2016

Sir Martin Sorrell upsets City investors and analysts because he demands that he be paid as much as some of them, but the difference is that he has proved he is worth the money.

In 30 years at the helm of WPP, he has turned it from a shell company making wire baskets for supermarkets into the world’s leading advertising, marketing and communications business.

This puts him in a powerful position to judge what is really happening in the global economy at a time when ordinary people find it hard to pick a path between the panic in the financial markets and the relentless optimism of most politicians.

Sorrell shared his thoughts when announcing his profit figures last week. People in advertising are hard-wired to think of the glass as half full rather than half empty but that was not the mood of the clients, he said.

Tepid GDP growth, low or no inflation and the consequent lack of pricing power are instead encouraging businesses to hit their profit targets by cost-cutting rather than trying to boost sales.

Nor with all the geopolitical uncertainty and continued low inflation is there any reason to expect growth suddenly to accelerate.

The uncertainties about the direction of US interest rates, the outcome of the EU referendum, the health of the banking sector and the outlook for the oil price provides further excuses for caution. This aversion to risk is heightened by boards being preoccupied with their corporate governance responsibilities and the presence in the wings of short-term-focused activist investors.

There seems to be an unprecedented number of threats. Legacy businesses are vulnerable to technology-based disrupters such as Uber and Airbnb. Elsewhere there is a proliferation of low-cost competitors with more efficient business models like the Lidl and Aldi supermarket groups.

In between, there is the ever-present threat of activists seeking to grab value today at the expense of tomorrow.

In the circumstances, a short-term focus on procurement and finance takes precedence over a medium term investment in capacity, brand building and sales growth.

And despite exhortations from the Government and investors like Legal & General and Black Rock to think long term, that seems likely to be the pattern for the rest of this year.

Not a disaster, but not very exciting either.

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