The City is brutal. It has digested the news that the board of WPP has hired independent counsel to investigate an allegation of “personal misconduct” against Sir Martin Sorrell and immediately advanced the story by several jumps. What’s the succession plan? Who’s the next boss? What does it all mean for WPP’s strategy? Will bits and pieces of the advertising empire assembled by Sorrell over the past 32 years now be sold to the highest bidder?
That line of questioning rather ignores the fact that Sorrell “unreservedly” rejects the unspecified allegations and presumably expects to be wholly vindicated. If he is indeed cleared, it’s quite possible that he’ll be intending to stay in harness for years. Read his statement: “My commitment to the company, which I founded over 30 years ago, remains absolute.”
Yet the City’s rush to the “what next for WPP?” question is indicating something – an appetite for change. The share price of WWP, an advertising and marketing company, has fallen 40% in the past year as the advertising market has turned soft and there is a widely held view that the firm needs a strategic re-boot.
Kantar, the market research and data business, is a prime candidate for a sale, runs one argument, and Sorrell’s personal attachment to the unit is getting in the way of commercial logic.
Sorrell, if he survives with his job and his integrity intact, would he wise to address those points. He has collected £200m in pay and bonuses over the past five years, and now investors, who approved the over-the-top incentive scheme in the first place, want to know how he plans to restore the share price. Their request is reasonable, even if the current drama is resolved in Sorrell’s favour.
Seat of blame at Mothercare
If it doubt, send for an ex-Tesco executive. It worked at Morrisons, so you can’t blame Mothercare for giving it a go. David Wood arrives at Mothercare as chief executive directly from Kmart in the US, but he made his name at the UK’s biggest supermarket chain, on the home front and internationally.
Mothercare’s last CEO, Mark Newton-Jones, has stepped down and, given the collapse in the company’s share price, he can hardly be surprised that time has been called on his four-year run. Last month the group revealed it was in danger of breach its banking covenants and is now in talks with its lenders to secure funds for a turnaround programme.
Yet the explanation given by Alan Parker, Mothercare’s chair, that “it is essential we have the most effective leadership in place to meet our ambitions for our customers and our shareholders” feels very limp. Parker has been chair since 2011 and Wood becomes the fifth chief executive on his watch, if one includes the six months that Parker did the job himself.
If Mothercare has been too slow to cut costs and react to the rise of online retailing, doesn’t the high-profile and long-serving chair also carry some of the blame?
Vauxhall’s route unclear
“Today’s decision is a vote of confidence in Vauxhall’s high-skilled workforce and the UK’s world leading automotive sector,” crowed the business secretary, Greg Clark, as PSA, the French owner of Vauxhall, unveiled plans to build a new model of the Vivaro van, in Luton.
Let’s hope Clark is right. But he shouldn’t celebrate too soon. PSA’s investment clearly shows confidence in the well-equipped facility in Luton, which beat competition from plants in Germany and Poland, but one can’t draw UK-wide conclusions.
The real test of PSA’s enthusiasm for making vehicles in the UK after Brexit lies in its commitment to Ellesmere Port, home of the Astra. On that score, PSA’s chief executive, Carlos Tavares, said next to nothing: no decision will be made before 2020 and post-Brexit trade arrangements will be a major factor. Tavares is allowed to be vague at this stage, but that remark offered few grounds for optimism.