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Martin Sorrell's CEO role in doubt as WPP investigates misconduct claims Martin Sorrell's WPP role in doubt after misconduct claim
(about 9 hours later)
Sir Martin Sorrell’s iron grip as chief executive of WPP is under threat after the advertising group hired a law firm to investigate an allegation of personal misconduct.Sir Martin Sorrell’s iron grip as chief executive of WPP is under threat after the advertising group hired a law firm to investigate an allegation of personal misconduct.
Sorrell, 73, “unreservedly” denies the allegation, which is thought to involve improper use of company funds. Sorrell is one of Britain’s best-known and most highly paid business leaders. He is also the longest-serving FTSE-100 chief executive and has run the sprawling WPP empire since starting the business in 1985.
The investigation will put pressure on Sorrell, who is one of Britain’s best-known – and most highly paid – business leaders. In the last five years alone Sorrell has been paid well over £200m for running the world’s largest advertising group thanks to lucrative and highly controversial reward schemes. His £70m payout in 2015 was one of the biggest in UK corporate history.
He founded the company as a two-man operation in a London office in 1985 and under his three-decade tenure running the business it has grown into the world’s largest marketing services group with about 134,000 staff in more than 100 countries. The investigation will increase pressure on Sorrell, who is already feeling the strain as WPP’s share price has tumbled almost 40% in the last year to its lowest point since 2013.
The price slump has wiped £9bn off the value of the business, which owns 406 separate advertising and marketing firms in more than 100 countries, including top-flight brands such as Ogilvy & Mather and J Walter Thompson. It has 134,000 staff.
WPP recently reported its worst performance since the advertising recession in 2009, which Sorrell described as “not a pretty year”.
The 73-year-old “unreservedly” denied the misconduct allegation, which involves the improper use of company funds and allegations of improper personal behaviour.
“The board of WPP has appointed independent counsel to conduct an investigation in response to an allegation of personal misconduct against Sir Martin Sorrell, chief executive officer of WPP,” the company said.“The board of WPP has appointed independent counsel to conduct an investigation in response to an allegation of personal misconduct against Sir Martin Sorrell, chief executive officer of WPP,” the company said.
“The investigation is ongoing. The allegations do not involve amounts which are material to WPP.”“The investigation is ongoing. The allegations do not involve amounts which are material to WPP.”
Sorrell said he rejected the allegation but understood that the company had to investigate the matter. “WPP is investigating an allegation of financial impropriety by me, specifically as to the use of company funds,” he said. Sorrell, who is on a rare holiday, said he rejected the allegation but understood that the company had to investigate the matter.
“This allegation is being investigated by a law firm. I reject the allegation unreservedly but recognize that the company has to investigate it. I understand that this process will be completed shortly. Obviously, I shall play no part in the management of the investigation under way.” “WPP is investigating an allegation of financial impropriety by me, specifically as to the use of company funds,” Sorrell said.
The question of who will eventually succeed Sorrell is raised annually at the company’s annual shareholder meeting. WPP has always maintained that there is a list of potential internal and external candidates that is monitored and refreshed, however Sorrell has never given any indication that he may be ready to step back. “This allegation is being investigated by a law firm. I reject the allegation unreservedly but recognise that the company has to investigate it. I understand that this process will be completed shortly. Obviously, I shall play no part in the management of the investigation under way.”
WPP shares have come under pressure recently – last month the company said the past year was its worst in growth terms since the 2009 advertising recession. They fell 2% in early trading on Wednesday in response to the investigation. WPP has called in two top law firms, Allen & Overy and Slaughter and May, to advise on the investigation.
Sorrell said 2017 “was not a pretty year” for the company but denied it was because his agencies were being cut out of deals between advertisers and Google and Facebook. The trouble at the top has once again put a spotlight on the issue of succession at WPP amid accusations of a “Sorrellcentricity” – the view that Sorrell runs the giant business autocratically as a personal fiefdom, dominating decision-making.
Sorrell, one of the UK’s highest-paid chief executives, who has taken home well over £200m in the last five years, said WPP spent more than $6bn (£4.4bn) of its clients’ advertising and marketing money with Google, its biggest single investment, last year, a 10% rise. Facebook received about $2.1bn of its ad spend last year, a 30% rise. The question of who will succeed Sorrell is raised every year at the company’s shareholder meeting. Sorrell has never given any indication that he may be ready to step back.
Roberto Quarta, a US businessman hired as WPP’s chairman two years ago, has said that succession planning has intensified, becoming “even more focused and detailed”.
He said there was an “exceptional team of potential candidates” from WPP’s top management, as well as a “constantly refined list of external candidates”.
There is understood to be tension about Sorrell’s future among members of WPP’s 12-strong board, which has been heightened by the recent performance slump. At least one director is known to be agitating to oust him.
“If Sorrell were to leave the company for any reason, WPP has a relatively deep bench of talent who could pick up any slack on a near-term basis,” said Brian Wieser, an analyst at Pivotal. “A more significant issue relates to who would lead the company next and what strategic direction the company would pursue.”
WPP shares fell a further 2% in trading on Wednesday in response to the investigation.
Sorrell has denied the group’s poor recent performance was a result of his agencies being cut out of deals between advertisers and Google and Facebook.
He said WPP spent more than $6bn (£4.4bn) of its clients’ advertising and marketing money with Google, its biggest single investment, last year, a 10% rise. Facebook received about $2.1bn of its ad spend last year, a 30% rise.
Sorrell and his family trust owns a stake of about 1.8% in WPP, worth about £250m.
“As a significant share-owner, my commitment to the company, which I founded over 30 years ago, remains absolute – to our people, our clients, our shareholders and all of our many stakeholders,” Sorrell said.
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