New York — Martin Sorrell spent the past three decades building an obscure maker of wire baskets into a global advertising powerhouse, earning millions and a knighthood from Queen Elizabeth along the way. His downfall was far swifter.
Sorrell, 73, said late on Saturday that he would resign from his position as chief executive office of WPP Plc with immediate effect. His departure followed allegations of personal misconduct and misuse of company assets, and comes days before the board was set to publish the findings of an investigation. Sorrell has denied any wrongdoing.
The WPP chief was the de facto elder statesman of the ad industry and a figurehead of corporate Britain, appearing regularly in public to discuss issues from Brexit to Donald Trump’s trade wars to the rise of Facebook and Google. He also courted controversy with his pugnacious manner and inflated pay package, particularly at a time when WPP’s revenue stalled.
The WPP chief was the de facto elder statesman of the ad industry and a figurehead of corporate Britain, appearing regularly in public to discuss issues from Brexit to Donald Trump’s trade wars to the rise of Facebook and Google
In a statement to WPP employees, Sorrell said the current disruption was putting "too much unnecessary pressure on the business" and that in the interest of the company and clients it was "best for me to step aside".
"As a founder, I can say that WPP is not just a matter of life or death, it was, is and will be more important than that," Sorrell said in the statement late Saturday. "Good fortune and Godspeed to all of you."
The bittersweet taste of his departure was apparent in his farewell note, which laid out in great detail the long journey of WPP from humble beginnings to an empire of more than 400 agencies across 112 countries, counting 200,000 employees. He said he had spent every day of the past 33 years thinking about the future of the company, which he built into the world’s largest and most successful advertising firm.
Fall from grace
Sorrell’s fall from grace took less than a month after WPP announced April 3 that it was investigating the allegations. Chairman Roberto Quarta now becomes executive chairman until the appointment of a new CEO, WPP said in a statement late Saturday. Mark Read, who heads WPP agency Wunderman, and Andrew Scott, WPP’s corporate development director, become joint chief operating officers.
The resignation preempts what could have been an inglorious departure. Sorrell was set to join the rest of the board early next week for scheduled meetings ahead of the company’s quarterly results, making a quick resolution of the probe almost inevitable.
The investigation into Sorrell has now concluded, WPP said, reiterating that the amounts were not material.
The company’s decision not to reveal the specific nature of the allegations nor the outcome of the investigation is bad for WPP shareholders, said Guy Jubb, an honorary professor at the University of Edinburgh business school and a frequent critic of WPP’s opaque corporate governance.
"WPP leaves a cloud of suspicion when the sunlight of transparency would be a welcome disinfectant," he said.
Full-time CEO
Sorrell’s 1985 investment in Wire & Plastic Products and a string of acquisitions of advertising companies that followed in effect founded WPP, making him an executive seen by some as irreplaceable for his direct access to clients and active hand on a sprawling network of agencies.
For years, the board supported his outsize pay packages amid shareholder complaints because he delivered. He earned about £200m over the past five years, largely due to a lucrative performance-related bonus package.
But beyond the investigation that leaked this month, there were other signs Sorrell was losing his magic touch. WPP’s financial guidance has repeatedly proved too optimistic, and its shares have lost a third of their value over the past year — far more than rivals facing the same market challenges of reduced ad spending and competition from web giants.
WPP on March 1 lowered its long-term profit outlook after reporting its worst annual performance since the global financial crisis, capping a string of disappointments that put Sorrell on the defensive.
Succession planning
The probe served to intensify scrutiny of Sorrell and WPP’s succession planning, long criticized by investors as being insufficient, prompting speculation that a CEO seen as unstoppable might be forced to step aside.
Sorrell had been no stranger to adversity — he overleveraged the company in 1989 when buying creative agency Ogilvy and almost lost WPP to the banks. He battled through the burst dotcom bubble, the post-9/11 downturn and the shock of the Great Financial Crash, continuing a spree of debt-fuelled acquisitions to build the £15bn marketing behemoth of today.
The latest misconduct probe appears to have been one challenge too many, and casts doubt over Sorrell’s future as a public doyen in advertising and global business.
"The circumstances surrounding this are regrettable, as is a leadership transition without Sir Martin’s direct involvement," said David Herro, a partner at Harris Associates, one of WPP’s biggest shareholders. "Sir Martin is a visionary, a legend in advertising and a skillful businessman. He will be missed at WPP but eventually he was poised to step down."
Stiff competition
His abrupt departure contrasts with the fate of arch-rival and fellow advertising elder statesman Maurice Levy, the 76-year-old who led Publicis Groupe for 30 years before taking on the role of chairman of its supervisory board. New-York based Omnicom Group, another WPP competitor, recently consolidated the CEO and chairman role in John Wren, who has led the company for two decades.
Sorrell will be treated as having retired, based on the directors’ compensation policy, the company said. His share awards will be prorated in line with the plan rules and will vest over the next five years, to the extent that performance targets are met. Sorrell is one of the largest shareholders of WPP, with a 1.46% stake, according to data compiled by Bloomberg.
Whomever WPP appoints to succeed its founder will need a strategy to respond to stiff pressures in the ad world. Major clients such as Unilever and Procter & Gamble have been shaving their marketing budgets, and consultants such as Accenture, Deloitte and IBM are tapping into funds previously deployed on traditional advertising campaigns. The power of Facebook and Google also presents a challenge, with investors concerned about the diminishing role of agency middlemen.
Quick solutions
"There will be great interest in resolving the full-time CEO role as soon as possible," Brian Wieser, a media analyst at Pivotal Research, said by e-mail. "It’s favourable for WPP that the issue was resolved fast enough that it wouldn’t have become a distraction."
Some analysts have speculated that Sorrell’s departure could herald a breakup of the company. WPP’s data management unit Kantar would be a potential sale candidate because its revenue growth has "consistently underperformed" the group average, London-based media analyst Ian Whittaker at Liberum wrote in a note last week. A sale could generate £3.5bn for WPP, which could be used to pay down debt or return cash to shareholders, Whittaker said.
"There will be a feeding frenzy," Alex DeGroote, a media analyst at Cenkos Securities, said via email. "We would expect an orderly WPP breakup, releasing value to shareholders."
Bloomberg
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