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The head of the world’s biggest advertising agency resigned on Saturday night after the conclusion of an investigation into alleged financial and personal misconduct.
The board of WPP Group, the company that owns many of the world’s biggest advertising agencies including Ogilvy & Mather and GroupM, said in a statement late Saturday that chief executive Martin Sorrell would be retiring from WPP after 33 years with the global ad firm. It did not detail the “misconduct” but said its investigation had concluded. Sorrell has denied the board’s allegations.
In a memo shared with WPP staff on Sunday, Sorrell attributed his departure to financial pressures brought on by changes in the advertising industry, but the Wall Street Journal reported on Sunday that Sorrell risked having WPP’s board publish the results of investigation if he stayed at the company.
“As I look ahead, I see that the current disruption we are experiencing is simply putting too much unnecessary pressure on the business, our over 200,000 people and their 500,000 dependents, and the clients we serve in 112 countries,” Sorrell wrote in the memo.
Sorrell, 73, is arguably the most recognizable figure in all of advertising, having turned WPP into a global giant that controlled $74.4 billion in advertising spending in 2017. Sorrell had built the company over the course of more than three decades and was known to some as “Davos Man,” given his ubiquitous presence on the elite global conference circuit. Sorrell also gathered tech players such as Google, Twitter and Snapchat at WPP’s own tech conference, known as Stream, in Cannes, France.
Sorrell’s departure caps a rocky six-week period for WPP that began with a huge stock drop due to a negative outlook for the advertising company in 2018. That was followed a month later by news that the board had hired an independent counsel to look into whether Sorrell had misused company assets and engaged in “improper personal behavior,” according to the WSJ.
WPP has struggled this past year in part as a reflection of the difficulties experienced by its clients such as Procter & Gamble, which is one of the biggest advertisers in the world. P&G has cut advertising spending by $750 million and faced challenges from an activist investor, Nelson Peltz, who has pushed the company to lower costs.
Meanwhile management consultants such as Deloitte and Accenture are nibbling away at the ad agency business, offering expertise in strategy and data analysis for big marketers as well as the business of creating advertising.
WPP Group has already lost some major businesses, including AT&T. Ford is also currently reviewing its agency relationship with WPP. Many of the biggest U.S. media companies, which spend heavily on promoting movies that are produced by their studios, are also re-evaluating the market and seeking out consolidation and cutting costs.
The board statement said that WPP chairman Roberto Quarta would take over as executive chairman and that two internal executives were being named co-chief operating officers; Mark Read, the chief executive of Wunderman, one of WPP’s advertising agencies, and Andrew Scott, WPP’s corporate development director and chief operating officer of Europe. A search is being conducted for a new chief executive.
The swift management change comes as WPP — and the entire ad agency business — is being battered by clients looking to cut spending and take advantage of technological change that allows them to identify their customers more precisely.
“There is frustration with the stock and an absence of business growth at company level,” said Brian Wieser, a senior advertising analyst at Pivotal Research Group. “They weren’t able to dig themselves out of a strategic muck.”
Some see Sorrell as a victim of the times and his departure a result of the board’s desire for a fresh face at the helm. The ad firm warned in March that 2018 would be a rough year and that 2017 was “not pretty.” The stock suspended trading on March 1 because it fell 15 percent in one day after it warned 2018 would show little to no growth.
Medialink chief executive Michael Kassan, an industry consultant to media and marketing firms, said the change would cause ripples throughout the marketing business.
“I believe we are at a tipping point,” Kassan said. “It is a time when industry models are being challenged. You have always been able to count on Martin to have the fortitude to plough through.”