Senior executives at Martin Sorrells’ S4 Capital received reduced bonuses despite an “excellent” performance in the depths of the pandemic in 2020.
The pure-play digital advertising group pays its senior executives lower-than-market-rate base salaries, but higher-than-market-rate annual and long-term incentives. They also get equity in the businesses.
Sir Martin, for example, as executive chairman receives just £100,000 as a basic salary, said to be well below the market rate for such a role.
Scott Spirit, the chief revenue officer based in Singapore, gets SG$540,000.
For 2020, the bonus scheme was based 70% on financial targets and 30% on objectives linked to the integration of the many businesses acquired by S4 Capital during the year.
According to the company’s annual report, the stretch target for the gross profit growth element required 30% growth on a like-for like basis compared to 2019.
S4 Capital's second full-year results, described as “outstandingly successful,” saw revenue up almost 60% to £342.7 million but like-for-like was 15.2%, missing the 30% target.
“In light of the impact of the pandemic, it was not possible to achieve this challenging target despite the exceptional efforts of the management team over the year,” the remuneration committee chair Paul Roy writes in the annual report.
“After consideration, and in recognition of the achievement of 19.4% gross profit growth during a particularly difficult period, the committee exercised its discretion to determine that it would be appropriate to permit a small portion of the bonus for this element of the scheme to pay out, equal to 15% out of the maximum of 35%.”
“The overall bonus outcome was 75% of the maximum available under the scheme, which the committee believes is consistent with the overall level of performance of the business for the year both in absolute terms and relative to comparator companies.”
Long term, both Sir Martin and Scott Spirit hold what are called Incentive Shares, dated May 2018. These, if the company’s growth continues, will deliver a huge bonus.
The Incentive Shares entitle Sir Martin and Spirit, subject to certain vesting criteria, up to 15% of the growth in value of S4.
£100 invested in S4 in May 20218 was worth about £581 in December 2020.
The market capitalisation of S4 is currently around £3 billion.
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