WPP Just Cannot Live Without Martin Sorrell

(Bloomberg Gadfly) -- The revelation that WPP Plc's CEO Martin Sorrell is being investigated over allegations of personal misconduct has reopened the debate about who can succeed him at the advertising giant.

Sorrell insists he's done nothing wrong. Whether that's true or not, it has been a torrid 12 months for the 73-year-old. News of the investigation sent WPP's already languishing stock to its lowest in almost five years.

The trouble is that a WPP without Sorrell at the helm still seems unimaginable. This remains the case even though the shares have lost a third of their value in the past year, amid accusations that he underestimated the scale of structural change in the industry.

Yet he continues to be the glue holding together an unwieldy global sprawl of advertising, marketing and public relations firms that he spent 30 years buying and building. On Madison Avenue, personal relationships still count, even as Facebook Inc. and Google have torn up the business. It doesn't help that succession is a sensitive subject for Sorrell. As such, it is a major risk for investors.

He has been loath to identify or openly groom a successor, meaning that his being hastily ushered away from the scene would no doubt throw the company into disarray. That's the downside of having a dominant CEO for such a long time.

Better timing would have helped. Far preferable to have put in place open succession planning when WPP was flying high. Doing it at such a low ebb would naturally smack of desperation, and it's often harder to get someone to relinquish control when their legacy and reputation is at stake.

The experience of Publicis Groupe SA is informative. Back in 2013, after a planned merger with Omnicom Group Inc. fell apart, its longtime CEO Maurice Levy said he would step down in 2017. (Admittedly, this came after years of speculation about when Levy might clear off.) Four top executives were singled out as possible successors, and six months before his departure, Arthur Sadoun assumed the mantle.

Crucially, Levy set in motion a restructuring plan in 2015 laying the groundwork for Sadoun. Publicis has since started to perform better than WPP. Sorrell might do well to follow suit.

The announcement of a hard retirement date still looks unlikely, unless things get much worse or the investigation finds something serious.

But if this does blow over, it would make sense at least for Sorrell to publicly pick out some prospective heirs and start his own program to get WPP shipshape once more. That would at least allow him the same level of control as Levy in his eventual departure, while soothing the fears of investors about future planning.

The danger of ducking the subject is that the break, when it comes, might be much harder. For Sorrell and the company he built.

Martin Sorrell is on the board of Bloomberg Philanthropies.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Alex Webb is a Bloomberg Gadfly columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

To contact the author of this story: Alex Webb in London at awebb25@bloomberg.net.

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net.

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