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Martin Sorrell’s downfall: why the ad king left WPP

The Financial Times logoThe Financial Times 11/06/2018 Madison Marriage and Matthew Garrahan

© Reuters Martin Sorrell’s driver had worked for the WPP chief executive for 15 years, ferrying the ad land king around London in a Range Rover. Last autumn his job came to an abrupt end.

Having worked 12 days on the trot, an extra long chauffeuring shift had finished with a request to pick up Sir Martin’s wife, Cristiana, from Isabel, a Mayfair restaurant, and drop her at the couple’s Belgravia home.

It was 2am and the driver was told he needed to be back five hours later for another job. He refused, claiming he had a previous appointment and, in any case, would not be safe on the road with just two or three hours sleep. Sir Martin fired him the next day.

Neither man would have known at the time that this moment of executive intemperance would help to trigger a train of events that would lead to Sir Martin stepping down from a business he had spent 33 years building — transforming a maker of wire supermarket baskets into the world’s largest marketing and communications group.

Since Sir Martin resigned on April 14 after a board-level investigation into his personal conduct and use of company money, the Financial Times has spoken to more than 25 individuals who have worked closely with the former WPP boss.

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What has emerged is a picture of routine verbal abuse of underlings and a blending of Sir Martin’s corporate and private life that jarred with some colleagues — particularly over his company expenditure, some of which was also extended to his wife, Lady Cristiana Sorrell.

Few dared to challenge Sir Martin’s behaviour at WPP’s headquarters, calling into question the quality of boardroom oversight of one of Britain’s most successful executives, a man deemed both impossible and indispensable.

In the weeks following the 73-year-old’s departure, there has been criticism of the company’s handling of the matter, in particular the lack of disclosure over the reasons for his exit. Glass Lewis, the shareholder advisory firm, has recommended that investors vote against the re-election of chairman Roberto Quarta at WPP’s annual shareholder meeting on June 13.

Sir Martin was able to walk away from WPP with his multimillion-pound incentive arrangements intact. Initial disquiet has turned to anger among some shareholders and employees after he announced last month that he was launching his own advertising group, a potential competitor to WPP.

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The absence of any information beyond WPP saying an investigation into alleged personal misconduct had “concluded” has led to wild and unsourced speculation about his departure.

But interviews with a range of WPP employees, past and present, have now allowed a picture of events to emerge, which centres on an alleged visit to a Mayfair brothel one year ago — said to have been witnessed by two employees, one of whom later reported it to the company. This alleged incident raised questions about the possible use of company funds and appeared to fit a pattern where personal and company expenses were hard to separate.

Sir Martin’s temper

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Sir Martin’s chauffeur was a popular figure at WPP’s Farm Street offices, enjoying a friendly relationship with the bank of executive assistants (three in London, with a parallel team in New York) who saw to the WPP chief’s needs on a 24-hour basis — and also those of his wife, Lady Sorrell.

For many women over the years, being a “Sir Martin EA” has proved a punishing, if well-remunerated, role. Annual salaries were typically above £80,000, but by the account of several assistants the FT has spoken to in detail, this did not go far enough. One EA referred to her salary as “combat pay”; another as “battle pay”.

Sir Martin’s treatment of his assistants and other junior colleagues was well known among senior staff, but they did not know how to respond when they witnessed it, according to current and former executives within the WPP group.

“He was brutal and inhuman in how he dealt with his assistants,” said one former executive. “He would say ‘you’re f****** idiots, what’s f****** wrong with you’ . . . He had a real dark side.”

[Martin Sorrell] used to treat the PAs in his office, who rotated in and out with a lot of frequency, pretty badly

Former WPP board member

A former WPP board member, speaking privately, added: “I never had a problem with Martin. He never raised his voice or shouted at me. But [with the] PAs in his office who rotated in and out with a lot of frequency, he used to treat them pretty badly. There was a lot of turnover among that group because it was a pretty thankless task.”

Another employee said working for Sir Martin “was like being in an abusive relationship” — he was charming to the outside world but oppressive within the walls of his own company. Several former employees said the chief executive would often swear at underlings, calling one elderly colleague a “pudding” and describing others as “bozos”.

Sir Martin has accepted he can be difficult at times, especially in cases of poor performance, but he denies he mistreated, abused or bullied staff. His supporters point to the longevity of many people’s careers in diverse roles at all levels at WPP, along with dozens of messages of support he has received recently. Sir Martin declined to comment personally for this article, saying he has signed a confidentiality agreement.

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While there have been exceptions, executive assistants working in Sir Martin’s immediate orbit have typically lasted no more than 18 months or so. For many, the job proved just too demanding. As one former employee told the FT: “After a year, my doctor told me that if I continued I would be dead.”

She described the head office as a “toxic environment”. “There was a fear culture,” she said. “Everyone threw everyone else under the bus to not look bad in his eyes. The personal assistants were expendable . . . This is the only [major] company I have worked for that felt like the board answered to the CEO, rather than the other way around.”

Sir Martin the ad land Sun King

Throughout his tenure, Sir Martin revelled in his status as one of the world’s top media executives. He reshaped the industry through audacious dealmaking and the acquisition of illustrious agencies such as J Walter Thompson and Ogilvy & Mather.

Today WPP owns about 400 disparate companies in media buying, analytics, research and public relations and employs 130,000 people. It represents clients such as Procter & Gamble, Google, Ford and Unilever — relationships that were often struck and maintained by Sir Martin himself.

But Sir Martin was much more than a chief executive. A regular fixture at the World Economic Forum in Davos, he was also a star turn at conferences around the world, dispensing wisdom about the latest economic and geo-political trends.

Sir Martin was a perpetual motion machine, always working — even on holiday — and responding to emails 24 hours a day. His travel schedule took him all over the world, meeting clients and partners and into regular contact with the global elite. When Prince Harry married Meghan Markle in London last month, Sir Martin was among the guests at St George’s Chapel in Windsor.

The frenetic pace of his travel required close co-ordination with his team of assistants who also dealt with the needs of Lady Sorrell, who was often required to be at Sir Martin’s side at events with clients and their spouses. But some insiders say they often found it hard to discern when he and his wife were travelling for business or pleasure — and whether it was appropriate that the company picked up the tab.

The blurred lines between the spending for corporate and personal purposes became a source of resentment within head office. Total expenditure was reviewed at least once a year, leading to fierce arguments about which items required personal reimbursement by Sir Martin, though they were ultimately reconciled and signed off by auditors.

In 2015 — the year Roberto Quarta was appointed chairman, succeeding Philip Lader — WPP revealed that the chief executive’s total benefits for the preceding year came to £453,000, including £274,000 in spousal travel expenses; £36,000 towards a car; and £43,000 towards “other expenses”.

Last year, Sir Martin was paid a fixed allowance of £200,000 to procure his own benefits. After 2015, WPP stopped providing spousal travel benefits for Lady Sorrell, who is a senior adviser to the chairman of the World Economic Forum, and a director of Viacom, the entertainment giant, and Revlon, the cosmetics company. More recently, Lady Sorrell pressed for a more regular review of expenses, suggesting a weekly tally.

The appointment of Mr Quarta, the chairman of medical equipment group Smith & Nephew, and the addition to the board a year earlier of Nicole Seligman, a top Sony executive and lawyer who once represented former US president Bill Clinton, suggested a more robust approach toward the talismanic CEO. Mr Quarta was “certainly not a soft touch, and anyone who thinks he’s going to be in there and be [Sir Martin’s] guy is wrong”, an associate told the FT at the time of his appointment.

Still, there was little Mr Quarta could do about Sir Martin’s bumper pay package in 2015. Struck under the previous board regime, his remuneration was calculated in five-year cycles that guaranteed extraordinary payouts if WPP’s share price performed well over a sustained period. That year Sir Martin took home £70m — a sum that sparked an investor revolt, with more than a third of WPP shareholders voting against the company’s remuneration policy.

Despite his generous benefits and pay package that made him among Britain’s best-paid chief executives, it was common at Farm Street for Sir Martin to request cash for day-to-day expenses. This had long puzzled head-office staff, who were aware that all his needs — restaurants, drinks, transport, laundry, gifts — were typically put on the company account or credit card.

It was all the more puzzling because Sir Martin was not always required to provide receipts for the cash he received. It was an allegation about his use of such cash that formed part of the investigation into his conduct.

Sir Martin’s representatives have stressed that given the amount of travel and client entertainment around the world that his job entailed, his expenses were inevitably “significant”. They have said “great care and attention” was always taken by the company and the CEO over his expenses and that he “denies there was any misuse of funds”.

A person close to the company said cash sums were logged, usage documented and subject to review. The person added that these sums were reimbursed when required and audited, and that petty cash was not used since the end of 2017.

When receipts were not provided, the company required “an explanation regarding business use” or alternatively the sum would have to be reimbursed, the person said.

The alleged incident

In 2017, the company painstakingly assembled by Sir Martin had hit a rough patch. The packaged consumer goods conglomerates that were its biggest clients — groups such as Nestlé and Procter & Gamble — were cutting their spending with WPP’s network of creative agencies and media-buying companies.

Activist investors such as Nelson Peltz, who had built a position in Procter & Gamble, played a role in driving down spending that was hitting WPP’s growth. But so too did the rise of Facebook and Google as the world’s dominant platforms for online marketing and the emergence of new competition for WPP in the form of consultancies, such as Accenture and Deloitte, which have moved into advertising.

Within WPP there were nagging fears that Sir Martin was not moving quickly enough to address the new digital marketplace. “The formula that we had that had been so successful had run out of speed and was past its sell-by date,” said one colleague.

A former executive added: “His business model has come under stress at a time when he is distant from the consumer trends that are putting it under pressure. You won’t learn what 16-year-old girls are thinking about when you hang out at Davos.”

During 2017 and into 2018 WPP shares lost a third of their value as its results missed expectations and the company cut forward guidance on revenue. Several big clients, such as HSBC, announced they were putting their business with WPP up for review. Sir Martin was under increasing pressure.

Last October, he fired his long-time chauffeur. The dismissal was met with shock and sadness across the executive suite — not least because of the length of the driver’s service — and a resolve to act.

Challenging a dominant boss such as Sir Martin was a risky business, but the climate had changed over the course of 2017 with the stunning downfall of a succession of all-powerful men in the media and Hollywood.

The FT’s revelations in January about sexual harassment at the Presidents Club charity dinner — an all-male gathering for the business elite that included regular sponsorship by WPP over the past 33 years — served as another catalyst for action.

Speaking out about inappropriate male behaviour suddenly felt possible, and one WPP employee eventually took the leap.

The whistleblower’s personal journey began on June 6, 2017, when the employee and a colleague met for a drink in Shepherd Market, a Mayfair square known for its bars and restaurants. It is also one of London’s remaining red light districts.

It was a Tuesday night before the WPP annual general meeting. The two colleagues were seated outside a bar where they allegedly witnessed Sir Martin entering a building — and took a photograph of the location, at 50a Shepherd Market — that months later would feature in the misconduct investigation.

It is unclear if the employees told anyone at the company what they had seen at the time.

The FT has been told prior complaints about his behaviour often went no further than the company secretary, Marie Capes, who has worked at WPP for decades and is known for her loyalty to Sir Martin.

Ms Capes referred the FT’s request for comment to WPP, which in turn said it had a well-publicised independent helpline “available to all employees . . . who wish to raise concerns”. “We take allegations of this nature extremely seriously when the specifics are raised,” the company said.

Multiple people confirm that, in the early months of 2018, one of the employees broke their silence and confided to a senior colleague about what they had allegedly seen that evening in June 2017.

A discussion was held among senior colleagues in Farm Street. A decision was then made to take the allegation to Mr Quarta, according to a person with knowledge of the meeting.

Given the seriousness of the allegation of personal misconduct and potential misuse of company funds, Mr Quarta and Ms Seligman, by now WPP’s senior independent non-executive director, treated the matter as whistleblowing. They set up a board subcommittee and hired an external law firm, WilmerHale, to carry out an independent investigation led by partner Stephen Pollard.

Sir Martin was interviewed for two hours by WilmerHale partners on March 29, without his personal lawyer present because he assumed it was a fairly routine matter. As well as the alleged sighting in Shepherd Market, he was questioned about his management style and treatment of staff. He denied wrongdoing.

[He] strongly denies any misuse of company funds for any purpose

Sir Martin’s representatives

The investigation of one of Britain’s most respected business leaders, a renowned expert in managing the reputation of world-class companies — as well as his own — was not only extraordinarily sensitive; it also raised delicate questions for the board around how much to disclose to shareholders and Sir Martin’s right to privacy.

After a fraught interview, a distressed Sir Martin considered resigning. For some time, he had been weighing his future at WPP. Options included selling the company, making way for a successor or toughing it out.

That weekend, Sir Martin weighed up what to do, consulting with lawyers, family and friends. Eventually, he proposed a mid-course: continuing as CEO for an interim period while putting forward a new management structure including the establishment of two co-chief operating officers, Mark Read and Andrew Scott.

Sir Martin discussed his succession plan with Mr Quarta on Tuesday, April 3 — four days after his grilling by WilmerHale. He believed he was negotiating in good faith and expected a quick response, according to a person familiar with his thinking.

Shortly after the conversation concluded, to the astonishment of Sir Martin, the Wall Street Journal revealed the existence of an investigation focused on Sir Martin’s personal behaviour and whether any company funds had been misused.

Mr Quarta had by this time hired a separate public relations adviser, Roland Rudd, to represent him and the board. His appointment was in addition to the existing WPP spokespeople Richard Oldworth and Chris Wade. Sir Martin meanwhile had beefed up his own legal team, hiring Quinn Emanuel alongside his personal lawyer, Richard Miskella at Lewis Silkin.

What happened next is a matter of controversy, made more difficult because of confidentiality clauses imposed on all parties as part of Sir Martin’s exit arrangements. WilmerHale’s findings were communicated to the board on Friday, April 13. However, there was no written report, and friends of Sir Martin say neither he nor his advisers were given the full picture.

The investigation concluded after finding there was no proof of misuse of company funds as alleged, the amounts of money in question were “wholly immaterial” and no other WPP employee was affected. The board therefore decided the matter was largely a personal issue for Sir Martin himself. He resigned the next day, on the Saturday evening.

In fact, Sir Martin had concluded his position as CEO was untenable within minutes of the leak the previous Tuesday evening. He was anxious to ensure that his privacy was protected and that he could fulfil the terms of his contract, allowing him to walk away.

The contract, agreed in 2008 by Mr Lader, Mr Quarta’s predecessor, was “somewhat one-sided”, according to a person close to WPP. It did not contain a non-compete clause and allowed him to depart with all of his incentives intact, unless the board found any “wilful gross misconduct” that brought “material economic harm to the company”.

Another bombshell detonated last Saturday evening, when it was widely reported for the first time that the company investigation that preceded Sir Martin’s exit had centred on whether he visited a brothel and used WPP money to pay a prostitute.

The timing of the disclosure was eye-catching, coming ahead of Wednesday’s shareholders meeting, and put the nature of the investigation squarely into the public domain. As a significant WPP shareholder, Sorrell is entitled to attend the meeting.

Sir Martin’s representatives have strenuously denied the allegation. They said the claim was made only after his chauffeur was sacked, almost a year after the alleged event. They said the investigation did not involve amounts that were material, adding: “The allegation does not relate in any way to his role at WPP and . . . [he] strongly denies any misuse of company funds for any purpose.”

The aftermath

Still, the immediate public furore sparked by Sir Martin’s departure with all his remuneration and incentives intact put Mr Quarta on the defensive.

The former chief executive remains entitled to performance-related share awards for five cycles of the WPP share plan, running until 2022. People close to the company insist that, since WPP stock has underperformed in the 18 months before Sir Martin’s resignation, the final payout to him will fall short of the maximum 1.65m shares — currently worth around £20m — that might be due to him.

Rival advertising executives have watched recent events at WPP with a mixture of schadenfreude and fascination. But there is also a sense of disappointment among some that his reign over the company has come to a sudden and ignominious end.

“People in WPP admire him enormously and didn’t want it to end badly,” said a senior executive at one of WPP’s largest competitors, speaking privately. “People want him to be remembered as one of the titans of the industry — not with egg on his face.”

Within weeks of resigning, Sir Martin had returned to the public arena with plans for a new advertising venture, backed by among others Jacob Rothschild, the 82-year-old financier.

Sir Martin is determined to have a second act, continuing a career well into his 80s, a little like the legendary investor Warren Buffett. But his aura of invincibility has been shattered. The company he built from nothing is reeling. With the annual general meeting just two days away, the board too has many questions to answer. The inquest has just begun.

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