Martin Sorrell’s departure from WPP leaves the advertising giant in a hazy mess

Although rumors of a 3-way split are doing the rounds, analysts from Goldman Sachs opine, given the preference of clients who choose ad agencies with integrated services over others, divestments and sales of assets are unlikely to be considered in the annual general meeting.

Martin Sorrell, 73, the most famous executive in the world of advertising quit WPP, the marketing giant that he founded and built from scratch, following allegations of personal misconduct in April 2018. Angry over his departures, investors and shareholders are likely to take the management of the company to task over a boardroom battle that has gripped the British corporate scene.

WPP’s annual general meeting is set to see sparks over Sorrell’s departure, specifically that he was allowed to leave the company without a non-compete clause, that he departed the company with shares worth millions of pounds and, as if those two were not enough, WPP paid Sorrell way too much and did not prepare for his departure.

Sorrell, who has already launched a new venture, has denied any wrongdoing and has reassured WPP’s shareholders that his new venture will not directly compete with WPP.

WPP, the world’s biggest ad agency which serves clients such as P&G, Ford and Vodafone and employs more than 200,000 people, did not reveal the nature of the complaint against him.

Angry over the lack of informations, advisory groups and shareholders have said they will either vote against the re-election of Roberto Quarta, WPP’s chairman or against the company’s remuneration report, or both.

According to company insiders, WPP is readying for a sizable revolt and expects shareholders with upto 30% stake to vote against it.

According to David Herro, Chief Investment Officer of Harris Associates, WPP’s biggest fund investor, he has backed the re-election of the board; 2 other shareholders from WPP’s top 20, also revealed that they had backed the re-election of the chairman.

However, shareholder advisory groups have not done the same.

“Glass Lewis has severe reservations about supporting the remuneration report at this time,” said an advisory group while adding that it advised investors to vote against Quarta’s re-election.

Investors also want to know WPP strategy given that it delivered its worst ever annual sales performance in 2017 since the 2007-2009 financial crisis.

According to Quarta, Mark Read and Andrew Scott, the two chief operating officers running the company, are reviewing its strategy which has given rise to speculation that WPP could sell assets, including its market research arm.

Owning more than 400 separate agencies which provides individual services, including data analytics, public relations, creative work, market research, media buying, among others, Sorrell was seen as the godfather of the modern advertising industry; his departures has given rise to the thinking that WPP could see a 3-way split, but the executives that are running WPP said, that strategy does not make any sense.

“We believe a break up would be difficult given the complexity and size of the organization and the resulting dis-synergies, at a time when clients take more integrated services from fewer agencies,” said Goldman Sachs’ analysts on Wednesday.

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Categories: Creativity, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

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