Furious investors demand answers
SHAREHOLDERS will tomorrow demand that the board of WPP comes clean over Sir Martin Sorrell’s resignation.
At the AGM in London, investors in the world’s biggest advertising agency will be able to quiz chairman Roberto Quarta about how the firm has been run and call for exact details of why Sir Martin abandoned his empire.
Sir Martin has been classed by WPP as a ‘good leaver’ after his sudden exit on April 14 – an assessment that means he will continue to receive payouts worth about £20million over the next five years. But leading City investment advisory firms suggest that without more information about the misconduct allegations against Sir Martin, it is impossible to decide whether he really was ‘a good leaver’ and deserves to pocket the hefty payouts.
Shareholder groups Glass Lewis and Pirc have both advised that investors vote against the re-election of Mr Quarta as chairman over his refusal to disclose details of the firm’s investigation into Sir Martin.
A Pirc spokesman said last night: ‘There is no disclosure regarding the reason for the sudden departure. Shareholders should be informed of significant events such as this.’
Annual meetings rarely live up to their promise. nevertheless, the gathering of WPP investors on london’s Southbank tomorrow should be a humdinger.
It has all the ingredients for a circus, including lurid allegations against Sir Martin Sorrell and demands from investor advisory group Glass lewis that chairman Roberto Quarta be removed.
There also are questions as to whether former boss Sorrell is really entitled to be treated as a good leaver after a deal cooked up behind closed doors which could gift him up to £20m in share options.
If any of this is hurting Sorrell it is hard to tell. a fortnight ago he was confidently doing the rounds – unescorted – at the Chelsea Flower Show. Moreover, much to the angst of WPP directors he is planning to start an advertising group through the shell company Derriston Capital with backing from veteran financier lord Rothschild.
The lesson from WPP is that it is never satisfactory for a public company to launch an inquiry involving major transatlantic law firm Wilmer Hale, force out the chief executive and then pretend that the allegations were trifling. The truth is that the details will eventually out. There is a narrative that says Sorrell’s troubles began when Roberto Quarta was chosen to replace easygoing predecessor Philip lader as chairman in 2015. Perhaps. But my own encounter with Quarta, when we met to discuss the chief executive’s pay cheque, was of a chairman in thrall to Sorrell who felt he deserved to be paid like a movie star.
The change of attitude towards Sorrell came with the choice of nicole Seligman, a high powered Washington lawyer, as senior non-executive director.
Her background at Washington litigation firm Williams & Connolly and in defending Bill Clinton during impeachment signals a person who takes no prisoners.
Many leaks about Sorrell first appeared in the Wall Street Journal suggesting that the american connection was important and much of the detail may never have emerged in the uK but for this. Through friends, Sorrell has maintained that he was always scrupulous in the separation of personal and business expenses. That may be, but the scale of his personal expenses – £453,000 in 2014 – on top of his outsize salary must be considered outlandish.
In a long career where he dominated the organisation it will come as no surprise that Sorrell was not as universally loved inside as he was by some of his sycophantic followers outside. When he fell from grace there were no shortage of witnesses willing to testify to bullying and an extravagant expenses-fuelled lifestyle. Much of this may amount to tittle-tattle. But there was only one way to properly clear the air and allow Sorrell to get on with his life and WPP to restore some normality. That was to publish the Wilmer-Hale report.
as Seligman will know from her Washington life, the ‘cover up’ often proves more toxic than the underlying problem. Engine trouble RollS-RoyCe has had more than its fair share of turmoil in recent times. But investors thought they could at least count on engineering excellence as bribery and bureaucracy were tackled. even that, however, is starting to look a little ropy. Having been required to acknowledge a problem with the compressor on its Trent 1000 C package engine, which powers the Dreamliner, it has now discovered a similar problem in another group of engines requiring a one-off inspection.
The need to do more inspections, replace some compressors, fly closer to airports and other precautionary measures are a costly embarrassment. Worse if it were to hand advantage to uS rivals General electric and Pratt & Whitney.
In spite of the distraction, chief executive Warren east is sensibly getting on with his task of eliminating duplicate middle management jobs with 4,000 set to go. That too will be costly and disruptive. But it is necessary if the uK’s premier engineering group is to maintain a competitive edge. US retreat PounDWoRlD may be at the opposite end of the market to House of Fraser. But the reasons behind the decision of its american private equity owners to pull the plug are much the same. Weak footfall, rising wage costs and surging business rates. additional stress comes from higher import costs.
But one cannot think that richly-resourced TPG – a value destroyer at Debenhams – pulled the rug too easily.