Former WPP boss Sir Martin Sorrell denies visiting a Mayfair brothel
A great test for leading FTSE 100 chairmen is the handling of shareholders in the midst of scandal. Roberto Quarta has the unenviable task of facing down WPP investors today on London’s South Bank.
The timing is unfortunate for Quarta, coming as it does after salacious revelations about the nocturnal preferences of former chief executive Sir Martin Sorrell.
When it comes to disclosure of the priapic details of Sorrell’s life, Quarta’s hands are tied.
Tried and tested privacy laws prevent WPP from releasing the legal report by Washington sharpshooters Wilmer Hale as demanded by investor voting service Glass Lewis.
WPP’s worry is that the trickle of demands for publication becomes a torrent which sweeps Quarta over the rocky ledge.
An immediate goal has been to head off the Institutional Shareholder Service, which was persuaded on legal grounds that the report by Wilmer Hale could not be published for privacy reasons.
The financial wrongdoing involving low thousands of pounds, rather than anything outlandish, are not in themselves considered material enough to demand publication.
Quarta takes the view that he has done a sound job in taming Sorrell. He claims to have guided Sorrell’s annual package down from the peak of £70million, to £40million, then £20million, and £14million in the latest report and accounts.
It was also recognised that Sorrell’s contract with WPP, dating back to 2008, gave the company no grounds for the former chief executive to be granted any other status than ‘good leaver’.
There were no misconduct clauses – a standard feature of any modern contract.
The board takes the view that Sorrell crossed the Rubicon when he bought into shell Derriston Capital with the pledge to turn it into a new WPP.
The firm’s directors had been on a mission to slow Sorrell’s break-neck acquisition spree across the globe and had turned back several proposals in recent times.
The concern is that Sorrell would use data gathered as WPP’s boss to switch the bids into his new vehicle.
There is also anxiety that he might poach key personnel, which in a creative company can be the lifeblood.
If any of this takes place, Quarta and his board are prepared to fight Sorrell tooth and nail.
They would seek to claw back up to £20million of so-far-unrealised options and could go further back if it was felt that WPP was going to be undermined.
Ahead of the AGM, the belief is that while Quarta might be embarrassed he will escape with a minor setback in the shape of a 10 per cent to 20 per cent vote against him.
Not enough to unseat him. Greatest punishment of all for Sorrell is that when his business obituary is written, the narrative of the builder of an advertising colossus will be obscured by his downfall in the sleazier parts of Mayfair.
A skilled communicator of Sorrell’s experience should have seen that coming.
Fixating on any single piece of economic data is a mistake.
Earlier this week there was disappointment that manufacturing output fell by 1.4 per cent in April and the goods export boom tailed off.
Then came the latest jobs data showing that Britain is an employment-creating machine.
Unemployment dropped by 38,000 over the past three months, the jobless rate is at a record low of 4.2 per cent of the workforce and vacancies continue to increase.
This does not look like an economy that is in trouble.
What is often lost in the loud noise about customs arrangements and the like is how the UK (in contrast to Germany) is largely an economy built on services.
So even though the ‘March of the Makers’ is looking dodgy, much of the new employment is in services, in which Britain runs a huge trade surplus with the rest of the world.
The future of the City is never assured. But since the Brexit vote, more financial services jobs have been created than lost.
Another sector holding its own is tech. San Francisco-based Salesforce is planning to invest £1.9billion in the UK, joining Google as a major inward investor.
Microsoft is extending its reach into the UK’s gaming sector, buying into Leamington Spa-based Playground Games and Cambridge’s Ninja Theory.
And Deliveroo is making a big push into online takeaway food, challenging FTSE 100 Just Eat.