Sir Martin Sorrell is in line for almost £20m in payouts from WPP over the next five years, as part of the deal struck to leave the advertising group he founded more than three decades ago.
The departure of Sorrell, who resigned on Saturday before learning the findings of an internal investigation into alleged personal misconduct, is also being viewed as a potential catalyst for a breakup of WPP.
The world’s largest advertising group said its founder and chief executive would be treated as having retired from the company. This means Sorrell will be eligible to receive payouts related to 1.6m shares in a number of award plans that will vest over the next five years. The exact value depends on the company’s performance. At WPP’s current share price of £12 the awards are worth about £19m.
1975
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
1985
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
1987
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
1989
WPP’s closest call with death came following an audacious debt-fuelled move to buy Ogilvy & Mather for $864m
1991
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
2005
Sorrell buys Ed Meyer’s Grey Global for £845m
2007
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
2008
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
2012
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
2015
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
2017
WPP endures its worst annual performance since the advertising recession of 2009, sending its share price tumbling by more than a third
2018
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
WPP has said the investigation into Sorrell, 73, who rejected the allegation of misconduct “unreservedly”, has concluded. The law firm in charge of the investigation, WilmerHale, was due to deliver its findings to the board by next Friday but details of the misconduct allegation and the outcome of the probe will not be made public. The allegations are the improper use of company funds, and improper personal behaviour.
Sorrell’s final full-year pay as chief executive for 2017 will be made public when WPP publishes its annual report in about a month. He is thought to be receiving between £13m and £15m, the lower end of a maximum of £19m he could have earned due to the company reporting its worst performance since 2009.
Sorrell is one of the UK’s best-paid business leaders, earning more than £200m from pay and lucrative – and highly controversial – reward schemes in the past five years alone. His £70m payout in 2015, was one of the biggest in UK corporate history. Sorrell and his family trust also own a stake of about 1.8% in WPP, worth about £250m.
In an email to staff, Sorrell wrote: “I shall miss all of you greatly. As a founder, I can say that WPP is not just a matter of life or death, it was, is and will be more important than that.”
To fill the leadership vacuum while a successor is found, Roberto Quarta, the WPP chairman, will take on the role of executive chairman. In addition, Mark Read, the chief executive of Wunderman and WPP Digital, and Andrew Scott, a top executive at WPP’s European operation, have been appointed chief operating officers.
This would make them the frontrunning internal candidates to take over from Sorrell, as the board also readies to reach out to its “constantly refined list of external candidates”.
“The succession arrangements look like a sticking plaster and, until strong and credible long-term leadership arrangements emerge, there will be concerns about the sustainability of the WPP Group, as we know it today, and its strategic direction,” said Guy Jubb, former global head of governance and stewardship at Standard Life Investments, an investor in WPP.
Analysts believe Sorrell’s departure combined with a share price slump of almost a third over the past year means investors and the WPP board will have to consider that there is potentially more value in breaking up WPP.
“The question to Quarta is how do we create shareholder value from this position. I think most analysts and investors when adding up the sum of the parts of WPP would answer that it is to break it up,” said Alex DeGroote, an analyst with Cenkos Securities.
The company’s board is already running the rule over whether it should explore a sale of Kantar, its market research arm, which could be worth £3bn.
Beyond its marketing services and PR operations – of which WPP’s global media agency powerhouses such as MediaCom have been the engine of its profits and revenue growth – DeGroote says there is a “treasure trove of hidden value” on WPP’s balance sheet worth billions of pounds that is not reflected in its core profits.
He estimates there is £1bn of property and £1.1bn of equity investments in companies including Vice, digital firm AppNexus, measurement company comScore and advertising group Chime.
