London — WPP is investigating an allegation of misconduct against Martin Sorrell, who has built the world’s biggest advertising empire over more than three decades of relentless expansion.
Sorrell denies any wrongdoing. He transformed Wire & Plastic Products from a basket maker through acquisitions of top creative agencies such as J Walter Thompson and Young & Rubicam, media planners and buyers, and market research and public relations groups.
He said on Wednesday that the allegation concerned financial impropriety, specifically the use of company funds.
"I reject the allegation unreservedly, but recognise that the company has to investigate it," said the 73-year-old, one of Britain’s best-known and highest-paid CEOs.
Succession
Shares in WPP, which said the allegation did not involve sums that were material to the company, fell to more than four-year lows and were down 2.1% in the late morning in London.
The investigation will raise fresh questions about leadership succession at WPP, given Sorrell’s dominance.
Chairman Roberto Quarta has previously said the board routinely discusses potential candidates should Sorrell leave, but no possible timeline has been publicly discussed.
Sorrell said his commitment to the group, in which he holds a 1.39% stake according to Reuters data, remained "absolute".
"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," he said.
WPP shares have fallen 36% in the past year after consumer goods clients such as Unilever cut ad spending, while digital companies Google and Facebook have encroached on its turf by forming direct relationships with brands.
The world’s four top advertising groups are rethinking their models after growing through serial acquisitions of agencies, which are often run as separate entities and designed to compete with each other to provide the best service.
But with technology changing the business of advertising and consumer goods groups demanding cost savings, clients increasingly want to work with one team that can provide a common proposal for media planning, creative ideas, data and analysis. And consultants like Accenture are offering more marketing services, raising questions about the future role of the major ad groups.
Sorrell said a law firm was conducting the investigation, which was first reported by The Wall Street Journal on Tuesday, and he understood the process would be completed shortly.
"I shall play no part in the management of the investigation under way," he added. Sorrell has been richly rewarded, receiving payouts of £70m in 2015 — then the highest for a British executive — and £48m in 2016.
Some investors baulked at his rewards, with a third voting against the 2015 payout, but Sorrell’s record was at the time enough to keep shareholders on side. Sorrell said in February that 2017 was "not a pretty year" for WPP. He said he would accelerate a plan to simplify the group, which employs more than 200,000 people in a total of 112 countries.
WPP’s forecast for 2018 is more pessimistic than peers Omnicom, IPG and Publicis.
Reuters
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