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CNBC Transcript: Squawk Box interview with Sir Martin Sorrell, CEO of WPP

Following are excerpts from a Squawk Box interview with Steve Sedgwick and Sir Martin Sorrell, CEO of WPP, as part of Europe Needs Swagger week.

On why slow growth is the new normal...

SS: This is another great example of the same conversation we had just now about companies investing and if there are regulatory changes going on. A company like Centrica, it's more difficult for them to make longer term investments in their supply, in grid, in whatever it may well be, and I'm not saying that the regulators shouldn't have great scrutiny, but it's another reason why people are holding off.

MS: It's a fact of life, particularly since Lehman, who we were talking about before, the government and the regulator was going to play an even greater part, and there are other even more difficult examples of regulators, quote on quote 'interfering' but understandably interfering in it. In the case of Centrica, you know, Ian came from BP where he was a client of ours too, and wanting to be a CEO, and my bet would be that Centrica will do very well. I think you're starting to see the signs, certainly from a stock price point of view, and a strategic point of view, sort of bottoming out and starting to move up.

SS: Here's another example, and this is another flash from Centrica, direct headcount expected to be reduced by 3,000 in 2016, a reduction of around 800 in the first three months in the year. Once again you've got a company for whatever reason, whether it's global economic conditions as Yellen would call it or its regulatory issues, structural problems in the UK, cutting jobs.

MS: But in a world that's growing so slowly, 3, 3 and a half per cent, and focus on the short term, people are taking out the head count. Why is it that productivity is not showing any long term improvement if people are taking out the head count? We see it, we are in exactly the same position, if we're not making budget obviously people or plan or plan against last year, you pull out head count in order to make the numbers, and I think that's effectively what's happening. Slow growth no pricing power, you saw the Nestle and Unilever results last week, did well from a top line point of view, and in terms of expectations, but again, complaints about lack of pricing power which means there's a focus on cost. Total natural reaction in a slow growth world, but that's the reality and all those central bankers that you've just referred to, or Yellen or whatever, can't explain the lack of animal spirit, and that's the most remarkable thing. Nobody can explain why it is that companies…

SS: Can you?

MS: Well, I just think that it's the environment, the new normal is that slow growth, the other thing is if you're trying to run a business, a legacy business, you have disruptors at one end, Airbnb and Uber, you have the zero base budgeters at the other end, who understand the importance of long term brand investing but are very focused on cost, and then you have the activist investors who get very upset when they're described as short term, but the perception is they're short term, they may think they're long term, but as I've always said to them they need a big advertising and marketing campaign to prove that.

SS: This technology, all of the disruptors creating economic well being as well, you mentioned Uber there, unbelievably great product, shaken up the whole transportation industry, but it's not profitable and it's not providing great income, let's face it, if you're an Uber driver I think that the conditions look pretty tough, and I'm not just saying Uber, it could be anyone in the private hire business.

MS: Well that's one of the issues they run in to. Take Airbnb and the hospitality or hotel industry, Airbnb is not subject to the same food safety, health safety, emergency safety, it's not subject to the same structures that somebody who runs a big hotel, say IHG or Marriot or Starwood, that are subject to the same restraints so this is a big issue, so the disruptors do not have the regulatory constraints, as they become bigger, as they become more prominent, ironically, they are subject to those things.


On why he makes no apologies for success…

SS: The bosses of the UK's biggest companies face a fresh shareholder revolt over pay. Apparently. Treasury committee chairman, Andrew Tyrie, urges investors to stand their ground against excessive pay packages. Sir Martin, you've waded into this one, many, many times and you've become a target…

MS: [Interrupts] Consistent message…

SS: Yes, consistent messages, I notice, I'm sure, one of your favorite UK newspapers, the guardian, says Sir Martin Sorrell, this is today, defends £63 million pound pay package ahead of AGM, what is the basis of your defense?

MS: Well, it's not, I didn't defend it…this is in connection with something else. No, listen, this has been going on for 31 years. 31 years ago at the ripe old age of 40 years old, I decided to go off and do something entrepreneurial. I was at a Saatchi and I invested 250,000 pounds, have consistently invested in the company – we talked earlier about the long term view - this is a long term view. One can talk about it as being a long term entrepreneurial exercise, if you like. And it's something I passionately believe in. My father said to me, find an industry you enjoy, find a company you enjoy, build a reputation in it, and then if you fancy doing something on your own, go off and do it.

So this is just one of a five year period, in the context of 31 years. Over that 31 years, we've gone from a million pounds capitalization, to 21 billion. 30 billion dollars. We now have 190,000 people in a 112 countries. Probably, 6 or 700,000 people rely on WPP for their living. I make no apologies for the success of that business. In fact, the continued success of that business.

Over that period of time, I've not sold any shares, except when I….

SS: [INTERRUPTS] 18.96 million last time I looked…

MS: Its actually about 25 million, one way or another that I haven't sold in the business…. But I continue to hold in the company, so every time the company does well, I benefit. And of course, a large number of other people – because I'm not the only one involved in these plans – and every time we do badly, we all suffer. So its geared to the success of the company. Its pay for performance.

SS: On that, do you think too many CEOs get paid for bad performance? I appreciate you still own 1.5%...

MS: [Interrupts] It's about 2 per cent of the company…

SS: …OK, so 2 per cent of the company, and I get the fact you started it. And the shares in 2011 were about 6 quid, 6.40, but now they're 16 pounds as well..

MS: [Interrupts] So were quite clear, the share price has gone from 6.60 when the latest plans started, to where it is where they are at the moment which is about 16.40, so, so, Mea culpa, or nostra culpa… (laughs) I wasn't very good at Latin, the problem is we've been successful. If that's bad news, OK, its bad news, but we can easily deal with that by not being successful.