Fleet Street is on heat. Journalists at every media outlet in town – from the red tops to the Financial Times – have the scent of blood and are out chasing down why Sir Martin Sorrell resigned so swiftly from WPP – the marketing and ad agency group – after allegations of “personal misconduct.”
If the gossip flying around is accurate, then finding proof will be difficult to pin down even for Grub Street’s sharpest jackals. All that is known publicly is that the amounts relating to the alleged ‘misconduct’ involved were immaterial in corporate terms, maybe less than a £1m.
Yet if hacks do manage to substantiate their suspicions, the alleged misdemeanours are of an embarrassing nature personally to Sir Martin rather than of unprofessional behaviour towards WPP or any of its employees.
With his typical gusto, Sir Martin has repeatedly denied the allegations unreservedly. But he has not said anything else publicly about his departure other than to say he is “sad.” Which is odd to those who know him because he is usually so loquacious.
Instead, it is friends of Sir Martin who have let it be known through the press that he believes the board was using the allegations as a pretext for ousting him. This has been persistently denied by WPP insiders, who claim that Sir Martin had their full support, despite the marketing giant’s recent trading problems.
As one WPP old-timer put it, suggesting a boardroom rift was a weird claim to make if Sir Martin had been hoping to be cleared of the charges being made against him. “How could you go back after making such foolish allegations? Think of the damage to board relations.” Quite.
The nature of the allegations would also explain why Sir Martin quit as chief executive less than a fortnight after the WPP board launched its investigation, rather than waiting to be asked to leave or indeed, stay, as a consequence of the outcome of the legal probe. He is also departing as a “good leaver” and will receive the latest 1.65m of shares due to him.
Which is why this story just gets curiouser and curiouser. What is particularly curious, and frankly fascinating, is why Sir Martin has always appeared to be willing to risk his own ambition over and above his brilliant reputation. Other than Sir Richard Branson, Sir Martin is perhaps the only British businessman to have rock star status, to be well known globally whether it was from giving his views on the global economy from the Davos stage or talking about his Ukrainian grandparents on the ditzy US TV show, the Valley Girls. He would do anything to sell the WPP story; it was his baby.
So why did he fight so much, and why did he take such liberties with WPP? If you were a cynic, you could say he loved the constant controversies over his pay packages, or what some critics say is symptomatic of his Sorrellcentricity, Over the last five years his pay has topped well over £200m, while his £70.4m payout in 2015 was one of the biggest pay deals in UK corporate history. He and his family trusts also own about 2% of WPP’s shares, valued at about £200m.
Yet despite Sir Martin’s huge pay, he would still charge the company for the smallest expenses, such as his wife’s flights where she accompanied him on overseas trips, and the cost of staying in his New York apartment to WPP, even though he owned it.
Why did the 73-year-old keep doing this? He certainly did not need the money. Nor did he need another fight with the press or criticism from shareholders.
But he kept doing it, despite being warned by his closest colleagues that he was pushing the boat out too far: tempting fate.
In truth, the criticisms seemed to make Sir Martin even more combative, claiming that his pay had become contentious for political reasons. This is what he said to me in an interview seven years ago, when the heat was on his pay once again: “The debate used to be about reward for failure – which I disagree with too – but it’s moved on to what is fair pay. That’s a political issue and everyone is scared of government threats to bring in new legislation to make votes binding on remuneration.”
“What will government do about the bosses of hedge funds, private companies or even fund managers who get paid as much or more.”
He particularly disliked being hounded by some investors for behaving like an owner. Again, this is what he said in our interview: “Well, I am an owner – I have nearly 2 per cent of WPP shares. If they said I am acting like ‘the’ owner, then they might have a point. I have been entrepreneurial since the day I started in 1985, and I still am today and that’s why I have skin in the game.”
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He went on: “You feel self-conscious bragging about what you have achieved so I don’t often point it out. But I founded this company with £250,000 – borrowed against my Saatchi shares – and it is worth £10bn today. There is something curious about the way the British criticise success rather than admire it.”
What was telling – and I believe the real reason why he kept fighting everyone – was that to him WPP was still his baby. He lived and breathed the company, phoning his top lieutenants, staff and journalists at every hour of the day – even while they were on holiday.
Indeed, our first meeting came about because he sent an overnight email via the Far East to me complaining about what I had written about him that morning in a national newspaper.
You have to admire his chutzpah, his borderline obsession with WPP. You also have to respect that he did the complaining himself, rather than send oblique messages via PR consiglieri.
Our particular contretemps was over comments I had made over his performance in a Radio 4 interview in which, in my view, he had failed to answer the question of whether he was worth what he was being paid. What’s more, he sounded pompous, claiming that his £1m salary was very low and he wouldn’t answer the question of whether he would work for less.
I suggested that the narcissism being displayed by corporate bosses such as Sir Martin – and other FTSE chiefs – was the new capitalism, and that it was bringing the free market into disrepute.
As you might expect, he didn’t like that, arguing instead that over 33 years he had built up one of the world’s biggest and most successful marketing groups, creating value for shareholders and employing 200,000 staff, and that he was still being entrepreneurial, and deserved every penny.
You can’t argue with that but what struck me at the time – and seems to lie at the heart of his constant fighting and subsequent departure – is that Sir Martin could not bear the idea that WPP was no longer his to command as he saw fit. He couldn’t let go.
But with WPP’s share price down more than a third after another “walloping” year, questions were already being asked about whether Sir Martin was up to the challenge of how the web is changing the advertising world. That those of the Mad Men era – like Sir Martin – were no longer equipped to deal with the rise of social media and the power of Google and Facebook and competition from new entrants such as Deloitte and Accenture.
WPP once had one of the biggest media buying businesses in the world – about $75bn worth of media to spend on behalf of clients. But that amount is falling fast as the world’s big multinationals find other outlets for their spending.
Procter & Gamble, for example, is the world’s biggest advertiser with a $11bn budget. But the owner of brands from Gillette to Pampers says that over the next three years it will cut more than $1.1bn from what it spends with advertising groups compared with 2015 while the number of ad agencies it works with has also been cut from 6,000 to 2,500 while more work is moving in-house.
If this trend continues, WPP and its rivals, Omnicom, Dentsu Aegis, IPG and Publicis, will have to adapt fast, first by cutting costs. WPP has one of the biggest networks and high overheads with 400 different advertising and marketing businesses in more than 3,000 offices based in 112 countries.
This new climate is why Mark Read, chief executive of Wunderman, WPP’s most sophisticated digital agency, has been give the role of joint chief executive alongside Andrew Scott, while the board hunts for a new CEO. But those in the know are putting their money on Read – something of a wonderman himself when it comes to things tech – as the man most likely to succeed Sir Martin. Tech Man takes over from Mad Men.
Beyond all the allegations about misbehaviour, tech is the real, underlying reason for the spectacular fall of Sorrell. His departure is rooted in the transfer of power from the ad agency titans of the 1980s and 1990s to the tech giants who now control advertising.