- Board looks at personal actions, says amounts ‘not material’
- CEO rejects accusations, says he understands need for probe
WPP Plc said it’s looking into allegations of personal misconduct by Chief Executive Officer Martin Sorrell involving possible misuse of company assets.
The board of the world’s largest advertising company is investigating the claim, according to a statement Tuesday. The company said the amounts involved aren’t material. In his own statement, Sorrell rejected the allegation while recognizing the company has to investigate.
“Obviously, I shall play no part in the management of the investigation under way,” he said.
The board has hired a law firm to investigate “an allegation of personal misconduct against Sir Martin Sorrell,” according to the statement. The Wall Street Journal reported on the matter earlier Tuesday, saying the investigation involved personal behavior and possible misuse of assets.
Sorrell, 73, is an icon in the advertising industry, having built WPP from an early investment in a British shopping-basket manufacturer. The London-based company had billings of $74 billion and 2017 revenue of more than $19 billion.
WPP has lost a third of its market value over the past 12 months, a reflection of the tough climate ad agencies face as clients trim spending and companies like Google and Facebook Inc. gobble up an ever-larger share of corporate marketing budgets. Other major advertising companies, including Interpublic Group of Cos. and Omnicom Group Inc., have also declined.
WPP shares fell 8.2 percent on March 1 when the company reported its worst annual performance since the financial crisis and gave a bleak outlook for the current year. They closed down 1.3 percent Tuesday in London before the allegations were reported.
The company said 2018 would be flat and that long-term earnings growth will be as little as 5 percent and twice that at best, compared with a prediction of as much as 15 percent previously. The year got off to a “slow start,” WPP said in early March, continuing a trend from 2017 that saw flat margins and sales. Sorrell said the outlook is deliberately cautious.
Some WPP watchers have been highly critical about what they perceive to be an over-reliance by the company on Sorrell and have claimed there has been a lack of succession planning. Guy Jubb, who led the charge while he was head of corporate governance at Standard Life and is now an academic, spoke before Tuesday’s developments.
“Sorrell’s succession is a key risk for WPP,” Jubb said in an email. “The board has a responsibility to demonstrate convincingly that it is on the case. Failure to do so will inevitably impact on investor confidence and open the door for activists.”