Sorrell probe highlights lack of succession planning at WPP

By Joe Mayesand Alex Webb

Martin Sorrell’s once- undisputed control of the advertising giant he has assembled over more than 30 years may be slipping away.

WPP is investigating allegations of personal misconduct by Mr Sorrell, 73.

The company’s formal statement, along with a denial by Mr Sorrell, was released after news of the probe was leaked to the Wall Street Journal, which reported that the accusations involved possible misuse of company assets.

The probe adds to mounting pressure facing the chief executive as the ad industry combats reduced spending from clients like Unilever and Procter & Gamble and rising competition from web giants including Google and Facebook, which are gobbling up an ever-larger share of corporate marketing budgets.

It highlights concerns of how the fate of a 130,000-employee operation is so closely identified with one person.

The trouble is that a WPP without Mr Sorrell at the helm still seems unimaginable. This remains the case even though the shares have lost a third of their value in the past year, amid accusations that he underestimated the scale of structural change in the industry.

Yet he continues to be the glue holding together an unwieldy global sprawl of advertising, marketing, and public relations firms that he spent 30 years buying and building. He has been loathe to identify or openly groom a successor, meaning that his being hastily ushered away from the scene would no doubt throw the company into disarray.

WPP shares fell 8.2% on March 1 when the company reported its worst annual performance since the financial crisis and gave a bleak outlook for the current year, predicting that long-term earnings growth will be as little as 5% and twice that at best, compared with a forecast of as much as 15% previously.

They fell by nearly 2% yesterday, giving the company a market value of £14bn (€16bn).

Some WPP watchers have been highly critical about what they perceive to be an over-reliance on Mr Sorrell and have claimed there has been a lack of planning for the day when he steps aside.

“What we would like as a house is to see a clear step of succession planning,” said Ketan Patel, from Edentree Investment Management, a WPP shareholder.

“Who’s coming through? In Sorrell’s case, he hasn’t identified or even brought in the people or a layer of management where you feel, if he did leave, they’d be ready to take over.”

- Bloomberg