The stinging rebuke from WPP’s shareholders to Sir Martin Sorrell, its founder and chief executive, marks a turning point in how investors treat company bosses who demand spectacular amounts of money. Or, if not, it should.
The old problem for shareholders was entrenched managers: executives who enjoyed a comfortable life and delivered mediocre returns protected by complacent boards. The solution was to pile on share options, long-term incentive plans and golden parachutes – the panoply of equity-based rewards designed to make chief executives think like investors.
In some ways, the 1990s revolution worked as intended. It opened the market for corporate control – the need for hostile bids faded – and it produced a new generation of well-trained, energetic and highly rewarded executives.