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Interview: WPP CEO Sir Martin Sorrell on Iran and more

Interview: WPP CEO Sir Martin Sorrell on Iran and more

Communications giant WPP’s CEO Sir Martin Sorrell discusses acquisitions, Iran and that $86m pay cheque

The saying ‘don’t all rush at once’ seems to apply very neatly to Iran in the months following the historic lifting of nuclear-related sanctions in January.

With everyone from the energy, tourism and hospitality industries queuing to stake their claim in the fertile landscape of the previously cut-off population of 83 million people, it seems the business world could be at the dawn of a new era.

And, of course, with new industry comes tremendous advertising and media opportunities. But for Sir Martin Sorrell, chief executive officer of the world’s largest communications group WPP, the market is one to approach with the toes rather than a headfirst dive.

“It’s the largest market to have really opened up since the fall of the Soviet Union or the Berlin Wall at the end of the Cold War. So it’s really important,” the adland veteran tells Gulf Business.

“We’re talking to a number of people in Iran at the moment. Now we are not subject to United States’ sanctions or licensing, we don’t have to get a US licence because we are a foreign company. But the banking sanctions, we have to look at very closely. We are talking to a large number [of people] in Iran and I expect we will do something shortly.”

The CEO continues: “The Iranians are very shrewd, so as the degree of interest is heightened in Iran, the pricing of opportunities has risen. But that was ever thus. So I think [there are opportunities] for all our brands in Iran in advertising, media, and data investment management. We’re already doing data work in Iran through other parts of the world, we’re already doing surveys.”

However, unlike Cuba, which also recently opened up and where WPP has opened its first office, there remains no official WPP presence in Tehran. This despite media group rival Dentus Aegis Network setting up a base there as far back as last year. But given recent developments with Iran’s ballistic missile programme and talks of reintroducing sanctions already circulating, it is perhaps just as well WPP has proceeded cautiously.

However, as Sorrell says, the potential there is undeniable. In population size alone, Iran outweighs both Cuba, with 12m people, and Vietnam, which had around 60m when US sanctions were lifted in 1994.

He adds: “I was at a Financial Times Iranian conference; it was a euro monetarist – I think it was one of ours – who said the female cosmetic market is worth $4bn and is predicted to get to $11bn in a few years.

“The tourism industry is a massive opportunity; there are 657 hotels in Dubai and there are only about 16 hotels or whatever in Tehran and very few of them are four star, five star status. Air France and British Airways are now opening direct coverage to Tehran from Paris and London. There are healthcare and education opportunities; they are a highly literate population.”

Sorrell has agreed to meet Gulf Business just 30 minutes before he is due to speak on a panel with former British Prime Minister Tony Blair at the Global Education and Skills Forum in Dubai. Despite speaking alongside such a headline heavyweight as Blair, Sorrell is able to generate his fair share of column inches.

Indeed that day, just hours before our meeting at The Atlantis Hotel, it was revealed that Sorrell’s pay packet this year would more than likely reach $100m. The largest portion of this is his $86m share of WPP’s long-term bonus scheme. Added to his salary and annual bonuses this will be the second largest single pay cheque given to the CEO of a FTSE-listed company, after Reckitt Benckiser’s Bart Becht took home $125m in 2009. And having faced criticism to the point of full-scale investor revolts in the past, it is no surprise this subject is a touchy one for him. “It’s not a bonus, it’s an incentive plan,” he argues.

“It’s based on the performance of the company and if the company did not perform well, we wouldn’t get it. The result is no surprise if we perform at the top for five years, which we have done.

“There are two things that have driven it,” he continues. “One is the performance of the company and two is the share price. The share price has doubled in the last five years so the market capitalisation has gone from $14bn to $30bn. So you can look at the figure and say that’s a large figure, but two things have happened; the company has performed above seven or eight of the top comparators and the second thing is that the share price itself has risen. What was allocated five years ago has doubled in value.”

Nevertheless this is far from the first time the CEO of the world’s largest advertising group has had to answer questions about his pay, with investor backlash occurring last year and in 2012 due to Sorrell and his fellow board members’ seemingly hefty slice of the pie.

In fact, it was the 2012 shareholder revolt that led to WPP forming a seemingly less generous incentive scheme called ‘Leap’ – the leadership acquisition plan. This calculates a bonus for executives on the basis of WPP’s performance over the past five years, which has given Sorrell a figure likely to send him up the next Sunday Times Rich List.

And yet while many CEOs continue to run for the hills at the very mention of the word ‘pay’, Sorrell has never been slow to defend himself. In 2004, when questions were again raised about his pay, Sorrell justified the $70m figure by describing himself as “truly entrepreneurial”. Fast-forward to 2012 and he even went as far as to write a personal defence in the Financial Times to assert he was “worth the money”.

Asked whether he expects any more backlash following the latest announcement, he says: “We’ll see, but investorshave been aware of it for five years and they voted the plan in, so they knew what the potential outcomes were. If the company was less successful, the amounts wouldn’t be paid and the share price would be much lower. What we have done is create value.”

While some of Sorrell’s previous assertions may leave some room for debate, there is certainly no doubt about his skill as a business leader in facilitating staggering growth. Now aged 71, London-born Sorrell’s long career in advertising saw him dubbed the ‘third brother’ of family agency Saatchi & Saatchi, for which he carried out numerous acquisitions in his guise as group financial director between 1977 and 1984.

Yet at the height of S&S’s dominance within the British advertising market, becoming something of a national brand itself, Sorrell jumped ship. Finding an opportunity in a downtrodden shopping basket maker Wire & Plastic Products, Sorrell borrowed $360,000 to buy a stake in the company. Before long, the company was relaunched as the advertising firm WPP Group and already valued at $1.5m.

Beginning the trend now seen as synonymous with the group, WPP soon acquired renowned agency J. Walter Thompson. Other major advertising brands Ogilvy & Mather and Young & Rubicam later joined the family as WPP continued to expand its remit into media planning and buying with more acquisitions, forming the subsidiary GroupM. Now with its latest additions of digital outfits Essence and the Exchange Lab, plus investments in Vice and House of Cardsdeveloper Media Rights Capital, WPP looks once again to the future as digital looks set to dominate the advertising and media markets.

Last year, the group added another 44 agencies to its ever-expanding global empire. And to use Sorrell’s phrasing, this year WPP is “off to the races quite rapidly”, having acquired another 16 agencies in the first two months of 2016 alone.

So why has this strategy become such a priority for WPP? One of the reasons Sorrell cites is “horizontality” or “getting people to work together for the benefit of the client”; a strategy that has led to some of their pitch-winning group efforts regionally, including the Suez Canal in Egypt and more recently Emirates’ global branding and creative account.

He adds: “You can’t make acquisitions for that other than to supplement for the areas that you don’t have.”

Meanwhile, the group will be increasing its focus on fast-growth markets rather than those already matured, of which the Middle East and North Africa will play a vital role. In fact, it is hoped these fast-growing markets will account for up to 45 per cent of the group’s overall business over the coming years, according to Sorrell.

But with low oil prices hitting the region’s economy and advertising spending predicted to fall by 10 per cent this year, will WPP start to experience the pressure already being felt by some of its closest competitors? The answer is, unsurprisingly, a resounding no, with Sorrell describing the current “volatility” and cost-focus as being a feature of life since 2011.

Comparing WPP to his major rivals, in particular the US-based giant Publicis, Sorrell asserts: “We made price commitments we can make and not rash promises. We have seen that, in our industry, those companies that are under heavy pressure, and are losing business and people, tend to make rash promises they can’t keep.”

And now, as WPP boasts 3,000 offices and 190,000 members of staff across 112 countries, does Sorrell plan to take his sizeable pay cheque this year and embark on a cushy retirement? Of course not.

“Why would I throw the towel in?”, he says, seemingly aghast at the thought.

“Why would I want to comfortably retire? You know I am an at-will employee so I can be sacked now or I can choose to leave now. But I will carry on as long as people want me to carry on.”

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