Governance & management

WPP is a large group with over 3,000 offices in 112 countries and we operate in a decentralised way, with many decisions made at operating company level. We aim to achieve consistently-high standards on sustainability across the Group and we provide a clear framework for our companies through our Group policies, including our Code of Business Conduct, Sustainability Policy, Data Code of Conduct and Human Rights Policy Statement.

Roles and responsibilities

Paul Richardson, WPP’s Group finance director, is the Board director responsible for corporate sustainability.

He chairs our Sustainability Committee, made up of senior representatives from Group functions, which meets annually on our Sustainability Strategy Day to review progress and discuss risks and opportunities. Paul Richardson shares outcomes from this meeting with WPP’s Nomination and Governance Committee and Board of Directors.

We have a small central sustainability team which determines strategy, develops policies, monitors performance data, communicates our progress and supports our companies in managing sustainability issues. To do this, it works closely with other Group functions such as our talent team, legal, real estate, IT and procurement. The head of sustainability reports directly to the Group finance director.

We track progress against our social and environmental performance indicators. Data is collected quarterly through our Group financial reporting system. Our carbon and employment data is verified by Bureau Veritas, an independent assurance provider. Sustainability issues are considered in selected internal audits.

Social, environmental and ethical risks are considered in the Group’s risk identification, management and monitoring processes.

How we manage sustainability issues

How we manage sustainability issues: The parent company is responsible for setting strategy, policy principles and guidance for the operating companies, and public reporting. The Operating companies implement Group policies and guidance, report to the parent company on progress and set more detailed/relevant policies. Sustainability issues are included in the Brand Check process. 

Stakeholder engagement

Stakeholder views and insights, including from clients, investors and our people, help us to improve how we work and to identify new sustainability-related risks and opportunities for our business. We aim to keep our stakeholders updated on our progress. We share stakeholder feedback on important issues with the executive team and Board of Directors, via our Group finance director.

Our most important stakeholders are:

  • Clients – we keep clients updated on our approach to sustainability through tender processes and our Sustainability Report. We undertake many marketing assignments that tackle sustainability issues and we partner with clients on issues of mutual interest, such as our work on the carbon footprint of marketing campaigns.
  • Investors – we engage with investors, rating agencies and benchmarking organisations on sustainability. In 2015, these included BNP Paribas, Corporate Knights, Dow Jones Sustainability Index, Sustainalytics, FTSE4Good, MSCI, Oekom, Trucost and Vigeo. To raise investor awareness of our activities, we submit the sustainability section of our Annual Report for share owner voting at our AGM. We are included in the DJSI World and Europe Indices and the FTSE4Good Index; we are an MSCI constituent and a constituent of the Ethibel Sustainability Index Excellence Europe and the Ethibel Sustainability Index Excellence Global. We participate in the Carbon Disclosure Project (CDP) and received a score of 97B in 2015.
  • Our people – we communicate with our people on sustainability and seek their feedback through meetings, events, employee surveys (run by our operating companies), the Group intranet and regular newsletters and publications. We distribute our Sustainability Report to over 2,000 senior executives and employees and we have a dedicated sustainability section on our Group intranet. Sustainability issues are also covered through our online ethics training completed by all employees. 

We carry out a formal materiality process to help us identify priority sustainability issues for the business and determine which issues are covered in our reporting. The last assessment took place in late 2014 and involved feedback from investors, clients, sustainable business experts and NGOs working in the areas of business ethics and human rights as well as WPP senior management. The results were communicated to the WPP Board. A summary of the findings is included in prioritising our material issues.

Engagement with governments and regulators is explained in the public policy section.

We received the Ethical Corporation Responsible Business Award 2015 for Best Sustainability Report.

Corporate governance

The WPP Board of Directors is dedicated to the principles of corporate governance defined in the UK Corporate Governance Code. It also upholds our commitment to complying with the laws, regulations and guidelines that apply in the countries where we operate, such as the US Sarbanes-Oxley Act 2002, the NASDAQ rules and their related regulations. We seek to respect the guidelines issued by institutional investors and their representative bodies, wherever this is practicable.

WPP operates a system of internal control, which is maintained and reviewed in accordance with the UK Corporate Governance Code and the FRC guidance on risk management and internal control, as well as the relevant provisions of the Securities Exchange Act of 1934.

Assessing and managing our risks

The Board, with support from the Audit Committee, has overall responsibility for the system – internal control and risk management in the Group. Social, environmental and ethical risks are considered in the Group’s risk identification, management and monitoring processes. Our approach is summarised below.More detail is provided in our Annual Report including a list of principal risks and uncertainties, see www.wpp.com/annualreports/2015.

Control environment and culture

The quality and competence of our people, their integrity, ethics and behaviour and the culture embedded within the Group are all vital to the maintenance of the Group’s system of internal control.

The Code of Business Conduct, which is regularly reviewed by the Board, sets out the principal obligations of all employees. Senior executives throughout the Group are required to sign this Code each year and all employees are required to complete the WPP How We Behave, Anti-Bribery and Corruption and Privacy & Data Security Awareness training modules, see our ethical standards. The WPP Policy Book which is updated with control bulletins includes required practices in many operational, tax, legal and human resource areas. Breaches or alleged breaches of the Code are investigated by the director of internal audit, head of compliance, the Group chief counsel and external advisers where appropriate. Group companies are also required to follow the Data Code of Conduct and the Code of Business Conduct – Supplier Version.

The Group has an independently operated helpline, Right to Speak, to enable our people to report issues that they feel unable to raise locally, and anonymously, if necessary, see non-discrimination and anti-harassment. The Compensation Committee reviews how the Group’s performance rewards support the risk management and internal control systems.

Risk assessment

The Group uses a three lines of defence model in relation to risk management.

First, each operating company undertakes monthly and quarterly procedures and day-to-day management activities to review their operations and business risks, supported by Group policies, training and SOX and reviews within their network.

Secondly, operating network reviews are formally communicated to the Group chief executive, the Group finance director and senior parent company executives in monthly reports and quarterly review meetings. At each Board meeting, the Group chief executive presents a Brand Check review of each of the business’ operations, including an assessment of risk. This includes the possibility of winning or losing major business, succession and the addition or loss of a key executive; introduction of new legislation in an important market; sustainability, including risks relating to marketing ethics, privacy and employment; political instability and changes in accounting or corporate governance practice.

Thirdly, internal audit, with Audit Committee oversight and external resource as required, provides an independent review of risk management and internal control.

Control activities and monitoring

Policies and procedures for all operating companies are set out and communicated in the WPP Policy Book, internal control bulletins and accounting guidelines. The application of these policies and procedures is monitored within the individual businesses and by the director of internal audit, head of compliance and the Group chief counsel.

Operating companies are required to maintain and update documentation of their internal controls and processes. The internal audit department was responsible for reviews and testing of the documentation and the relevant controls for a majority of the Group during 2015, the results of which were reported to the Audit Committee.

Read more in our Annual Report, www.wpp.com/annualreports/2015.

Tax policy

Tax revenues sustain national economies. We recognise our obligation to pay the amount of tax legally due in the territory in which the liability arises and comply with all legal requirements. At the same time, we have an obligation to maximise share owner value, which includes controlling our overall liability to taxation. However, we do not condone either personal or corporate tax evasion under any circumstances.

The WPP Audit Committee, which is made up of independent non-executive directors, is responsible for overseeing our policies on tax and regularly reviews our tax strategy.

The Group paid corporation taxes of £301.2 million in 2015, an increase on £289.9 million in 2014 following increased profits earned during the current year. Estimated employer and employee taxes (e.g. payroll and social security-related taxes) paid during 2015 were £981.2 million (2014: £857.7 million). Other taxes (primarily property taxes) paid during 2015 were £49.0 million (2014: £47.2 million).

We are starting to quantify the wider economic impacts of our business and the benefits associated with our activities including tax payments to governments. More information is available in valuing our impacts.

We maintain constructive engagement with the tax authorities and relevant government representatives, as wellas active engagement with a wide range of international companies and business organisations with similar issues. We engage advisors and legal counsel to obtain opinions on tax legislation and principles. Where disputes arise with tax authorities, in areas of doubt or where legal interpretations differ, we aim to tackle the matter promptly and resolve it in a responsible manner.

We have a Tax Risk Management Strategy in place which sets out the controls established and our assessment procedures for decision making and how we monitor tax risk. We monitor proposed changes in taxation legislation and ensure these are taken into account when we consider our future business plans. Our directors are informed by management of any tax law changes, the nature and status of any significant ongoing tax audits, and other developments that could materially affect the Group’s tax position.

Factors that may affect the Group’s future tax charge include the levels and mix of profits in the many countries in which we operate, the prevailing tax rates in each of those countries and also the foreign exchange rates that apply to those profits. The tax charge may also be affected by the impact of acquisitions, disposals and other corporate restructurings, the resolution of open tax issues, future planning, and the ability to use brought forward tax losses. Furthermore, changes in local or international tax rules, for example prompted by the OECD’s emerging recommendations on Base Erosion and Profit Shifting (a global initiative to improve the fairness and integrity of tax systems), or new challenges by tax or competition authorities, may expose us to significant additional tax liabilities or impact the carrying value of our deferred tax assets, which would affect the future tax charge.

The Group has a number of open tax returns and is subject to various ongoing tax audits in respect of whichit has recognised potential liabilities, none of which are individually material. The Group does not currently expect any material additional charges, or credits, to arise in respect of these matters, beyond the amounts already provided.

Annual Board and Committee Evaluation

The Board engaged Dr Tracy Long of Boardroom Review Limited to conduct a 2015/16 Board effectiveness evaluation and provide recommendations. She attended Board and Committee meetings as an observer and has held one-to-one discussions with each Director and the Company Secretary. Her observations and recommendations have been presented to and discussed by the Board in a dedicated session. The evaluation focused on:

  • The use of Board time and the quality and timeliness of information received.
  • The contribution made by the Directors, collectively and individually.
  • Areas and depth of Board engagement, including strategy, risk and control, succession planning, performance management and communication with stake holders.

The review identified both the strengths of WPP’s Board performance, which included a transparent Board and corporate culture, and the possible opportunities and challenges for the future. The recommendations to improve Board effectiveness focused on:

  1. Succession planning – further developing the Board process for succession plans for key senior roles at Board level and across the business, through strategic search, increasing the combined Board knowledge of the talent pool, both internal and external, and establishing working groups for talent reviews.
  2. Board composition – further improving the contribution that the Board can make to the business, by adding to the skill set that will match WPP’s business strategy, best practice corporate governance requirements and stake holders expectations, so to continue to attract the appropriate and diverse NED talent for future Board refreshment.
  3. Use of Board time – to further develop the agenda to ensure that a balance of strategy, performance and governance issues are included through the annual cycle of board meetings.

The Chairman, supported by the Company Secretary, will monitor and ensure progress on the implementation of the appropriate recommendations.