WPP’s board has hired independent counsel to investigate an allegation of personal misconduct against CEO Martin Sorrell, a move that industry experts say brings up questions around the holding company’s succession plans.
The investigation into the undisclosed personal misconduct allegation is ongoing, said WPP’s Buchanan Communications in a statement. "The allegations do not involve amounts which are material to WPP," the statement added.
According to a report from Pivotal Research Senior Analyst Brian Wieser, the biggest "risk" associated with the investigation relates to succession. "If Sorrell were to leave the company for any reason at the present time, it would be negative considering how involved he has been in the company and how instrumental he has been in assembling the assets the company has today," Wieser stated. "It is unclear how readily any executive could fill Sorrell’s shoes in orchestrating assets across the holding company when they need to work together."
One industry expert who requested anonymity told Campaign U.S. that "this is probably the beginning of the end" for Sorrell. "The optics are not great when a company hires independent counsel," the expert added.
The investigation comes a month after WPP – the world’s largest holding company - posted its biggest stock decline in almost 20 years and predicted no growth for 2018. It also follows on the heels of WPP facing increased pressure from Ford and spending cutbacks from large CPG clients, like Procter & Gamble.
According to a talent management and acquisition expert in the industry, Sorrell will be "very difficult to move" because his "legacy is very important to him."
While no successors have been named, one prediction from an industry insider is that Wunderman Global CEO Mark Read is the "natural" decision since he has done such a great job turning Wunderman around and has expertise on the investor relations side.
Wieser wrote in his report Tuesday that anyone who might follow Sorrell could "bring new ideas to the holding company and lead a rebound that we think will eventually occur, and may already have enough clout internally to execute on those ideas."
Representatives from WPP declined to comment beyond the statement from Buchanan Communications.
In an email via communications consultancy Project Associates, which "acts for Sir Martin Sorrell in his personal capacity," according to the firm, Sorrell stated: "Reports in the media have stated that WPP is investigating an allegation of financial impropriety by me, specifically as to the use of company funds. This allegation is being investigated by a law firm. I reject the allegation unreservedly but recognize that the Company has to investigate it."
The statement added: "I understand that this process will be completed shortly. Obviously, I shall play no part in the management of the investigation under way. As a significant share owner, my commitment to the company, which I founded over thirty years ago, remains absolute - to our people, our clients, our shareholders and all of our many stakeholders. I do not intend to make any further statement at this time."