WPP Stock Down 11% as CEO Sorrell Gets $95 Mil. Pay Package. Coincidence?

Last Updated Jun 3, 2009 2:37 PM EDT

Did WPP chief Martin Sorrell's new $95 million pay package wipe $1 billion off his company's market cap? That's one -- cynical -- interpretation of the effect of his new compensation package, which potentially rewards him with nearly $100 million in WPP stock after five years.

UPDATE: Another possible factor in the stock drop was this sale of $600 million in five-year notes. Within a day of the pay package being approved by shareholders, WPP stock slipped from $39.15 to $34.86, a nearly 11 percent drop. That was a decline in market capitalization -- shareholder wealth, if you like -- of roughly $1 billion.

Of course, the pay package news came on the same day as Sorrell revealed that revenues were down 3.9 percent at WPP through April, and more layoffs were on the way.

Conventional wisdom says that would be the driving factor in supressing WPP's stock ... except that we already knew WPP revenues were shrinking -- Sorrell told us himself back in March -- and the layoffs were scheduled on May 4. So both those events should have already been priced in to WPP stock.

The only thing different yesterday? The massive pay rises Sorrell and his executives were taking, and the $600 million debt sale. As BNET noted (via Adweek) earlier, those packages come at a cost. Up to 7.8 percent of profits, in some cases. And piling on debt never helped a company. Either way, Sorrell is being rewarded for placing his company in a worse position than it was a week ago -- through lower stock, higher executive expenses or higher debt. Pick your poison.

Side note: This is a screengrab of Google stock page for WPP earlier today. Check out the top headline.

Hat tip to Tribble.