Media

City unimpressed by Sorrell saga at advertising giant WPP

Company will be rushing to reassure clients that all will be well in wake of founder’s exit

Martin Sorrell: gets to keep some £20m of bonus shares. Photographer: Simon Dawson/Bloomberg

Fiona Walsh in London
Wed Apr 18 2018 - 05:43

Sir Martin Sorrell’s abrupt departure from British multinational advertising and public relations company WPP is undoubtedly the end of an era at the firm he built up over more than three decades.

But it’s not an end to the City’s questions. If anything, there’s even more uncertainty surrounding the group now than when the extraordinary chain of events first began to unfold just a fortnight ago. Such as:

  • Who will lead the world's largest marketing conglomerate as it begins its new era without Sorrell at the helm?
  • Will the business now be broken up and, if so, by WPP itself or by someone else?
  • What exactly did Sorrell mean when he signed off his farewell email to staff at the weekend with the words, "Back to the Future"?
  • Could the legendary adman, who famously never had a contract with WPP, already be planning a comeback?

But the most pressing question of all must surely be what exactly were the allegations of impropriety that sparked Sorrell’s ignominious departure? In an industry notorious for its love of gossip, it is little short of astonishing that no details have leaked about the precise nature of the allegations against Sorrell; allegations he has vigorously denied.

All we know now is what we knew two weeks ago, that the claims were made by a whistleblower and involved the improper use of company funds and improper personal behaviour. The amounts involved were not material to WPP.

READ MORE

Shareholders are simply expected to carry on as before

A forensic account of the charges against Sorrell – and presumably his side of the story – exists at the group’s Mayfair headquarters, no doubt under lock and key. But the report commissioned by the WPP board is to remain secret, a state of affairs that appears to suit the company and its former chief executive.

In the City, however, there are calls for the findings of the independent investigation to be made public. There is concern that the head of one of Britain’s largest companies – and one that is recognised around the world – should be able to quit a company so swiftly and amid such secrecy.

Shareholders are, apparently, simply expected to carry on as before. Former business secretary Vince Cable is having none of it. While Sorrell was “highly respected”, the report should be made public in the interests of transparency, he said, and not “swept under the carpet”.

The respected shareholder advisory company, Glass Lewis, also said it would “prefer” that the findings were made public, although it did not appear to hold out much hope they would be.

The lavishly rewarded Sorrell, it should be noted, gets to keep some £20 million of bonus shares due over the next five years because, officially, he has retired and is thus classed as “a good leaver”.

Had he fought to hang on to his job, as many in the City expected, then he’d have been anything but a good leaver, certainly in the eyes of WPP’s remuneration committee. And that, of course, would have put his shares at risk.

The investor jitters that saw WPP slide almost 7 per cent on Monday were not helped on Tuesday when Moody’s downgraded its outlook for the group from stable to negative. The ratings agency highlighted the fact that Sorrell’s exit “comes at a time when the company is already facing a number of operational challenges and introduces uncertainty over the strategy and ultimately the structure of the group”.

Head hunters have now been engaged by WPP to conduct the search for Sorrell’s successor. So much for the succession plan the board always insisted it had in place. They will be looking at internal and external candidates but it remains to be seen whether anyone can ever replace the notoriously hands-on Sorrell, with his unrivalled experience and vast contacts book.

There are fears it may again be forced to downgrade growth forecasts

The next hurdle for WPP comes at the end of the month, when it will update shareholders and the City on its performance over the first quarter. The group was struggling even before the Sorrell affair erupted and there are fears it may again be forced to downgrade growth forecasts.

In the meantime, the WPP board – and management teams of the 400 separate companies that go to make up the sprawling advertising conglomerate – will be rushing to reassure clients that all will be well in the post-Sorrell era.

They should also be soothing their own creative talents, lest the uncertainty surrounding the group should tempt the biggest hitters to stage their own swift exits to more stable rival firms.

Fiona Walsh is business editor of theguardian.com

LATEST STORIES