Who is Sir Martin Sorrell?

The 71-year-old is one of the best-connected people in the business world. His career took off at Saatchi & Saatchi where he spent nine years during the advertising firm’s heyday in the late 1970s and early 1980s and was the brains behind many of its acquisitions. In 1985, he went solo by borrowing £250,000, using his Saatchi shares as security, to buy into Wire & Plastic Products, a maker of shopping baskets.

He used the small public company, later renamed WPP, as a vehicle to buy up advertising firms, stunning the business world in 1986 by launching a $566m (£394m) hostile takeover of J Walter Thompson in the US. Buying JWT, 13 times WPP’s size and one of the oldest ad agencies in the US, put his company on the map. Sorrell has continued to make several acquisitions a year to maintain WPP as the world’s biggest advertising company. WPP, which still makes plastic baskets, has 190,000 employees in 112 countries with annual revenue of £12bn.

Sorrell is the quintessential “Davos man”, named after the Swiss resort where the financial elite gather every January. But, after riding roughshod over the gentlemanly world of advertising to build WPP, he still sees himself as an outsider and defends his pay as aggressively as he makes his deals. In 2010, he told the Observer: “Well, a psychologist could say I have a Napoleonic complex because of my size. I am exactly the same size as Napoleon, as I have pointed out, and people have criticised me for saying it. Five foot six and a half, which, you know, French metrics, it is five foot four and a half, their feet are 13 inches or something.”

How is he being paid £70m?

The precise figure will be known next week when WPP publishes its annual report. But, a stock market announcement last month detailing share awards, allows pretty good estimates to be made. It showed that Sorrell received 3,982,605 shares – worth £62.78m – from a bonus scheme which dated back to 2011. Next week’s annual report will include that sum alongside a £1.1m salary – and, if last year’s annual report is anything to go by, £463,000 of pension contributions, a short-term bonus (£3.5m a year ago) and compensation for dividend payments from shares locked up in bonus schemes (£1.2m a year ago).

How does a bonus scheme get to be worth £63m?

The shares he has received were awarded to him in 2011 under a five-year bonus plan known as Leap – leadership equity acquisition plan. Those shares – worth £26.5m in 2011 – were released to him after the company’s performance against 15 competitors was measured between 1 January 2011 and 31 December 2015, when WPP’s total shareholder return (TSR) – which measures share price movements and dividends – was 135%. He sold about half to pay his taxes. Other WPP high flyers are part of the Leap.

So the pay is a one-off?

Well, no. Sorrell has received more than £200m from WPP in cash and shares in 15 years as a result of a number of share schemes, most notably Leap. The first big pay deal was for 2004 when he received £50m.

So what exactly is this Leap that generates so much cash?The Leap was first introduced in 1999. Under the scheme, participants buy shares and lock them up during the five-year performance period. There has been more than one scheme. Apart from the original Leap there was a “renewed” Leap and then Leap III.

However, Leap is now being phased out. After a shareholder revolt in 2012, the company replaced it with a new scheme, called the executive performance share plan, in 2013. The new scheme is also based on a five-year period and is linked not just to TSR but also to other measures of performance – such as earnings per share and return on equity.

Even so, there is still one last remaining Leap, from 2012, which will pay out in 2017.

So is Sorrell the highest paid FTSE 100 boss ever?

No. In 2010, Bart Becht, then the chief executive of Cillit Bang-to-Clearasil business group Reckitt Beckiser, received £90m from awards of cheap and free shares.

So was that biggest pay deal of all time?

No again. The amounts paid to Sorrell, Becht and other leaders of stockmarket-quoted companies are often dwarfed by the sums earned by owners of private companies such as Sir Philip Green, the TopShop tycoon, who paid himself a £1.2bn dividend in 2005. That was the biggest payday in UK corporate history.

The finger often points at bankers, although the biggest pay deals are handed out to bankers outside the boardroom so are not disclosed publicly. Glimpses emerge from time to time. In 2011, Barclays revealed that two of its most senior investment bankers – Jerry Del Missier and Rich Ricci – had been handed £40m each after share deals awarded over the previous five years paid out. Bankers also accumulate wealth: Jamie Dimon, the chief executive of JP Morgan, has been valued at more than $1bn by the Bloomberg billionaires index.

Hedge fund managers can expect more. Multiples more. John Paulson, who runs his eponymous hedge fund, received $3.7bn in 2007 after betting against subprime mortgages.

How does Sorrell justify it?

Sorrell rolls out the usual answers – his pay is set by an independent compensation committee which links rewards to targets.

He also employs what is called the L’Oreal defence – “because I’m worth it”. He told a conference earlier this week: “WPP [was] capitalised at £1m [at its start in 1985]. Today it is capitalised at £21bn. I’m not a Johnny-come-lately who picked a company up and turned it round [for a big pay day]. If it was one five-year plan and we buggered off, fine [to criticise my pay]. Over those 31 years … I have taken a significant degree of risk. [WPP] is where my wealth is. It is long effort over a long period of time.”

He also insists that he is a business owner, rather than a manager who has risen to the top, who put his own money on the line and turned WPP from a basket maker to a giant FTSE 100 company. However, his stake is only 1.6% of WPP, which is tiny compared with a typical owner-manager.

Sorrell has countered “I am an owner, not the owner. I don’t treat it as my own personal fiefdom or empire, but my ownership concentrates my mind. Every time that share price moves 10p one way or the other, it means millions to me.” Other shareholders, he says, benefit from his commitment, drive and knowledge.

How do others view his pay packet?

In last year’s annual report, Sir John Hood, who chairs WPP’s compensation committee and agrees Sorrell’s pay deals, said: “The value of Sir Martin’s award, while large by any standard, equates to approximately one-third of 1% of the increase in value for share owners.”

Other businessmen agree. John Timpson, who owns the Timpson shoe repair chain, has described Sorrell as the business world’s equivalent of Lionel Messi, Simon Cowell or Elton John and reckons the WPP boss is underpaid in comparison.

“It is not as if his windfall had come from secretly manipulating the Libor rate or getting a bung for fixing a Fifa vote. He played to the rules and should be paid accordingly,” Timpson wrote in the Telegraph (partial paywall).

Stefan Stern, director of the High Pay Centre, does not doubt Sorrell’s credentials as a businessman, but said it created problems for appointing his successor. “Sometimes [sums] are just too big – this is an example of just too big.”