WPP WPP PLC

By Suzanne Vranica and Nick Kostov 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 4, 2018).

The board of advertising giant WPP PLC is looking into whether longtime Chief Executive Martin Sorrell misused company assets, according to people familiar with the matter.

In addition, the board is also looking into allegations of improper personal behavior by Mr. Sorrell, one of the people said.

A WPP spokesman on Tuesday confirmed in a statement that it has appointed an independent counsel to probe "an allegation of personal misconduct" against Mr. Sorrell. He said the amounts involved weren't material to the company.

In an internal memo to top WPP executives, the company said it isn't in a position to share further details about the ongoing probe. "The message for our people and clients is one of business as usual within our operating companies and client teams. Our work for clients is unaffected and continues uninterrupted," the memo said.

The questions come at a difficult moment for WPP, the world's largest advertising company. Increased competition from new rivals and pressure from big marketing clients to cut costs have taken a toll on financial results. The company's recent lackluster performance has contributed to tensions between Mr. Sorrell -- a towering figure at WPP -- and the board, people familiar with the matter said.

In a statement on Wednesday, Mr. Sorrell denied financial impropriety. "I reject the allegation unreservedly but recognize that the company has to investigate it. I understand that this process will be completed shortly. Obviously, I shall play no part in the management of the investigation under way."

Mr. Sorrell, 73 years old, has been at the helm of WPP since 1986, helping to transform a little-known U.K. manufacturer of wire shopping carts called Wire & Plastic Products that he had acquired into a global advertising empire.

Today, WPP is a massive advertising holding company whose units include blue-chip creative agencies like J. Walter Thompson and Young & Rubicam as well as powerhouse media-buyer GroupM. WPP, based in London, works for some of the world's biggest marketers, from Ford Motor Co. to Unilever NV.

Long-regarded as an oracle of the ad industry, Mr. Sorrell, a graduate of Cambridge University and Harvard Business School, used his finance background to build scale and centralize key functions like ad buying -- a winning strategy that was emulated by others in the business.

In recent years, though, traditional ad-industry players have come under considerable pressure from companies such as Alphabet Inc.'s Google and Facebook Inc., which dominate the roughly $230 billion global digital advertising market. The tech giants have the ability to work directly with advertisers, cutting out agencies. And they have tightly guarded their data on performance of ad campaigns, frustrating agency executives who aren't able to follow through in the way their marketing clients demand.

WPP has tried to address its problems by streamlining its complicated organization and coming up with ways for clients to work more efficiently with agency staffers. The going has been tough. In its most recent quarter, WPP logged its worst performance since the financial crisis, as net sales fell slightly compared with a year earlier, spooking investors who had been expecting signs of a recovery. The firm said it is setting budgets for 2018 on the assumption of no growth in revenue and net sales. As a result, WPP's stock has been underperforming. It has fallen about 35% over the past 12 months.

Mr. Sorrell's pay too has been a flashpoint, putting pressure on the board to reduce his compensation after a series of pay revolts by shareholders. Mr. Sorrell received a long-term bonus of GBP10 million ($14 million) in company shares for 2017, a significant drop from the GBP41.6 million in shares that he was awarded a year before. The share award makes up most of Mr. Sorrell's compensation, but his total pay will also include his salary, a short-term bonus, pension payments and other benefits.

WPP has never publicly disclosed succession plans, leading investors to demand more clarity on who would lead the company if Mr. Sorrell were to leave. Analysts have speculated that internal contenders for the role include Wunderman's global CEO Mark Read, Kantar boss Eric Salama and WPP chief transformation officer Lindsay Pattison.

--Alexandra Bruell contributed to this article

Write to Suzanne Vranica at suzanne.vranica@wsj.com and Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

April 04, 2018 02:47 ET (06:47 GMT)

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