Sir Martin’s Sorrell’s departure from WPP has prompted the leading ratings agency Moody’s to downgrade its outlook for the group, citing concerns including a breakup, the loss of clients and its poor performance compared with rivals.
The downgrade, from “stable” to “negative”, comes as WPP’s 11-strong board was set to meet on Tuesday with the task of finding Sorrell’s successor high on the agenda.
“In Moody’s view, the high-profile departure of Sir Martin Sorrell raises concerns over the future strategy and shape of the group, increases client-retention risk and could hence hinder WPP’s ability to meet its 2018 guidance,” said Christian Azz, Moody’s assistant vice-president.
WPP issued a number of warnings about growth last year on its way to reporting its worst financial year since the 2009 recession. It has also seen its market value slashed by a third. It lost almost 7% on Monday alone as jittery investors worried about its future without its founder as ad clients cut back their budgets and reconsider their spending strategies.
Timeline: Martin Sorrell’s career
It may not seem like it but Sir Martin Sorrell had a career before WPP. His affair with advertising began as Saatchi & Saatchi’s first finance director
Sorrell made his first step toward global domination at the age of 40, investing in a small Kent-based maker of wire baskets called Wire & Plastic Products
Sorrell announces himself on the global stage by buying J Walter Thompson, the world’s oldest ad agency and an iconic US brand for $566m. In 1988 he listed on NASDAQ exchange in New York
WPP’s closest call with death came following an audacious debt-fuelled move to buy Ogilvy & Mather for $864m
Sorrell paid too much for O&M and as the recession-hit WPP almost went out of business, a profit warning in 1990 sent its shares tumbling from 650p in 1989 to 115p. The company made a life-saving financial restructure but the close call damaged Sorrell’s reputation as a deal maker
Sorrell buys Ed Meyer’s Grey Global for £845m
Sorrell launches a libel action against two former colleagues for allegedly labelling him and a female executive “the mad dwarf and the nympho schizo” while circulating a “vicious” email image of them. Sorrell accepts a settlement of £120,000 damages
He moves WPP’s tax domicile to Ireland in protest at the prospect of “double taxation” of overseas profits – once abroad and once again in the UK. It moves back to the UK five years later after the government enacted legislation covering the taxation of foreign profits
The rising unrest at unbridled boardroom pay boiled over into a series of investor revolts, with Sorrell one of its most high-profile scalps. This was the year of the biggest of a series WPP investor rebellions with 60% rejecting his annual pay package
Sorrell’s £70.4m pay out is one of the biggest pay deals in UK corporate history. By the end of 2016 he has made more than £200m over a five year period
WPP endures its worst annual performance since the advertising recession of 2009, sending its share price tumbling by more than a third
Sorrell’s iron grip running WPP comes under threat after the board hires a law firm to investigate allegation of personal misconduct. He stepped down on 14 April
Photograph: Eric Gaillard/X00102
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“Sir Martin Sorrell’s resignation comes at a time when the company is already facing a number of operational challenges and introduces uncertainty over the strategy and ultimately the structure of the group going forward,” said Azzi.
Moody’s said that WPP was already weakly positioned before Sorrell’s departure, performing significantly below its peers such as the US groups Omincom and IPG and the French firm Publicis.
WPP’s board meeting, the first not to include its founder and chief executive in years, was expected to include Mark Read and Andrew Scott, the senior executives promoted to run the company day-to-day during the search for a new chief executive. They are also considered the two leading internal candidates.
The board member Sol Trujillo, a former chief of companies including the French telecoms firm Orange and Australia’s Telstra, is understood to have been one of the most vocal about the issue of succession at WPP.
A number of names have emerged as potential runners and riders to succeed Sorrell, including the chief executive of the publishing and exhibitions group Informa, Stephen Carter, who has worked at Ofcom, the cable firm NTL and WPP’s ad agency JWT; Adam Crozier, whose pedigree includes running ITV, the Royal Mail, the Football Association and Saatchi & Saatchi; the Sky chief executive, Jeremy Darroch, and Andrew Robertson, the chief executive of Omnicom’s global BBDO ad network.
Sorrell has said he was available to assist with the transition.
Martin Sorrell’s exit leaves too many unanswered questions
The 73-year old has “unreservedly denied” misconduct allegations and WPP’s board has said it would not be publishing the outcome of the investigations into them by an independent law firm.
The influential shareholder advisory firm Glass Lewis said it would prefer WPP to publish the report but that it accepted this was unlikely to happen.
“In the interests of transparency, we would prefer if the report was made available to shareholders, though we view that outcome as unlikely,” said Martin Mortell, Glass Lewis UK & Europe’s director of research. “Some investors may be willing to forego transparency in lieu of achieving overdue change at the top and the opportunity of a new strategic vision.”
Sir Vince Cable, the Liberal Democrat leader, has said there was a “real lack of transparency” and “any investigations done by the company should be made public”.
The company said it had concluded the investigation and had no further comment to make.
WPP’s share price moved up almost 2% in trading on Tuesday as market sentiment about the prospects of the advertising giant steadied.