Tax domicile of world’s biggest advertising and marketing group was relocated to Dublin in 2008 in protest over ‘double taxation’
Britain’s most powerful advertising man, Sir Martin Sorrell, is a step closer to relocating the headquarters of WPP back to London from Dublin, with a shareholder vote to seal the move due in December.
Sorrell, chief executive of the world’s largest advertising and marketing group, said the board approved the move, leaving shareholder consent as the final hurdle.
He moved WPP’s tax domicile to Ireland in 2008 in protest at the prospect of “double taxation” of overseas profits – once abroad and again in the UK.
“The UK coalition government has now enacted legislation covering the taxation of foreign profits from 2013,” said Sorrell . “This will mean that, at least for the life of this government, there will be no tax cost to the group by returning its headquarters to the United Kingdom from Ireland.”
But Sorrell was critical of the government’s wider tax strategy after this week’s call by Nick Clegg for a wealth tax.
“The government’s troubles started with the budget,” he said. “One of the budget provisions was to move the income tax marginal rate down from 50% to 45%. From an entrepreneurial view it didn’t make sense. If you want to improve entrepreneurial activity, reduce the rate of capital gains tax. Don’t mess about with income tax … The government has shot itself in the foot. “
Sorrell said investors will vote on the move at a WPP extraordinary general meeting planned for “early December”.
He said: “If shareholders think it is a bad idea they will vote it down. But I don’t think they will.”
When WPP moved to Dublin in 2008 it was with the support of 99% of shareholders, Sorrell said, indicating there would almost certainly be overwhelming support for the board’s decision this time.
Sorrell also addressed the issues raised following WPP’s annual general meeting in June, when nearly 60% of shareholders voted to reject his £6.8m annual pay packet. He also received a £5.6m share windfall under WPP’s leadership equity acquisitions plan.
According to corporate governance group Manifest, the protest was the largest shareholder rebellion at a blue chip company since 90% voted against Sir Fred Goodwin’s pension arrangements at Royal Bank of Scotland in 2009.
Sorrell admitted that he “misjudged the mood of shareholders”, but remained defiant about the need for British companies to pay well to remain competitive in the global marketplace.
“We do operate in a highly competitive environment, an extremely competitive environment particularly from a salary and compensation point of view,” he told the BBC. “If we want WPP to be successful or, frankly, if we want more WPPs in the UK we have to get a better understanding of what’s necessary.”
He added: “There are arguments on both sides and it is a question about what we really want at the end of the day in terms of competitive enterprises.”
WPP’s board – led by Philip Lader, the former White House deputy chief of staff who has chaired the company for 11 years, and Jeffery Rosen, the investment banker who heads its remuneration committee – has been meeting investors to discuss the revolt over Sorrell’s pay and reach a compromise on future payouts.
“The consultation is ongoing, we will see how it comes out,” said Sorrell. “It is very difficult to get a unified view from anyone, it is like trying to distil many views, it can be hard to come to a conclusion. What happens to me happens to others as well. At the end of the day the critical factor will be do we want WPP to remain competitive?”
On Thursday, WPP reported a 7% rise in pre-tax profits to £358m in the first half of 2012, but lowered its forecast for full-year revenue growth after a slowdown in June and July. WPP downgraded its forecast of 4% revenue growth for the year to 3.5%, although Sorrell cautioned that it was not a sign the company had concerns about a major slowdown in the global advertising industry.