By: Rob Davies

WPP directors are braced for a chastening showdown with investors over their handling of the resignation of Sir Martin Sorrell, whose departure from the empire he ruled for 33 years has triggered lurid allegations of personal misconduct.

The world’s largest advertising company will face protest votes at Wednesday’s annual meeting, the first since Sorrell’s resignation in April.

A group of shareholders will vote against WPP’s pay policy, which is set to hand Sorrell future share awards worth up to £20m, despite a lack of information about the reasons for his departure.

Several investors will also oppose the re-election of chairman Roberto Quarta, amid concern about his management of the crisis and his capacity to assume a more hands-on role while the firm seeks a new chief executive.

WPP has been embarrassed by a string of allegations – strenuously denied by Sorrell – that have leaked into the public domain about the advertising and marketing guru’s behaviour.

Claims have emerged that WPP staff said they witnessed the 73-year-old entering a premises used by sex workers, leading to concerns that the alleged visit was paid for with company money.

The report, in the Financial Times, was accompanied by further allegations from inside WPP about his use of company resources and that he created a “fear culture” by bullying staff.

He has vehemently denied the allegations but has refused to elaborate, citing a non-disclosure agreement signed with WPP when he left.

Despite the secrecy, WPP’s pay policy allows Sorrell to pick up future share awards worth up to £20m because he is designated a “good leaver”.

Shareholder advisory groups including Glass Lewis, Pirc and Hermes EOS have recommended voting against the pay deal, saying opacity around his departure makes it hard for investors to assess whether he is entitled to it.

City investment firm Royal London Asset Management said it would vote against the pay report but not due to Sorrell’s exit package.

Instead it cited “really high levels of incentive pay on offer during 2017”, when WPP handed Sorrell a pay deal worth £48m, a year after investors protested against an even more generous package worth £70m, one of the largest in UK corporate history.

RLAM will also vote against the reappointment of company pay chief Sir John Hood over “long-held concerns on pay” and will abstain on the reappointment of Quarta.

The investment firm has doubts over Quarta’s ability to juggle the executive chairmanship of WPP with his chairman’s role at FTSE100 medical supplies firm Smith & Nephew.

The two giant US pension funds Calstrs and Calpers have published their votes, with the former set to vote against Quarta but not WPP’s pay report, while Calpers protests on pay but backs directors.

As well as Quarta’s multiple jobs, the Italian-American businessman is expected to face criticism over a lack of succession planning and the fact that Sorrell was not bound by a non-compete clause preventing him from setting up a rival.

The industry veteran, who took over a wire shopping basket maker in 1985 and turned into the world’s largest advertising empire comprising a network of 400 companies, has already set up a new venture called S4.

He has put £40m of his own money into the company, topped up by a £11m from investors, and has said he wants to make acquisitions in “data, technology and content”. Financial backers have made commitments to plough in a further £150m to fund buyouts.

They are understood to include financier Lord Rothschild, Toscafund founder Martin Hughes, Saracens rugby club owner Nigel Wray, investment firm Schroders, private bank Lombard Odier and asset manager Miton.

Mark Read, WPP’s chief operating officer appeared to make a pitch to succeed Sorrell on Tuesday, sending an email to all staff promising a review of the company’s rules around conduct.

Read, chief executive of WPP’s digital marketing agency Wunderman, reminded staff of the company’s “values” following bullying allegations against Sorrell.

“When I come to work I expect to be treated with respect by my colleagues, and every one of you reading this has the right to expect the same,” he said.

“You will no doubt have read the press coverage this week about WPP and Martin Sorrell, including allegations about his behaviour towards people at the parent company.

“Although we can’t comment on specific allegations, I feel we should remind ourselves of and reinforce the kind of values we want and need to have within every part of our business: values of fairness, tolerance, kindness and – again – respect.

“It should hardly need saying that all WPP working environments must be places where people feel safe and supported. They must also be places where people are able to raise concerns if they want to, and where those concerns are dealt with when they need to be.”

WPP could also face a class action lawsuit after US specialist law firm Pomerantz said it was investigating concerns raised by investors about potential securities fraud and “unlawful business practices”.