Why Did Sorrell Go? Just Look At WPP's Share Price Graph

There is only one story in London today, and it reads a little like an obituary for a man who has for so long been the public face of an entire industry in the UK.

Sir Martin Sorrell has not waited for it to be disclosed whether or not he was guilty of whatever misuse of company assets he stood accused of. Allowing Sir Martin to bow out with a little dignity is face saving because WPP gets to wax lyrical about what a great man he was for the company without any reference to how he was not exactly regarded as parsimonious when it came to money.

He was the best paid Chief Executive of any FTSE100 company, earning tens of millions of pounds per year and facing a shareholder revolt each time his pay increased, all to no avail. He also had to deal with accusations that he was being rather cheeky having a lavish travel expenses account set aside for his wife. Still he survived whatever was thrown at him. Even on quitting he could still earn up to GBP20m a year, depending on the future performance of the company.

If there is one thing to look at in the whole debacle, it's the WPP share price graph. Since the global financial crisis it had steadily climbed as good results kept flowing in. Then 2017 happened and the chart has gone from a long encouraging steep climb to a sudden fall off a cliff -- from GBP19 to around the GBP11 to GBP12 mark within a year.

The Times probably summed it up well this morning. The damage was already done. After a terrible 2017, investors had already pegged back WPP to where it should be, a little over half of the all-time-high achieved early 2017, before results started going the wrong way. With a financial performance like this, the markets had pretty much accepted that the damage had already been done, and today shares are down 5%.

Put simply, Sir Martin is well past normal retirement age and had appeared to have lost his magic touch that kept WPP on the road to financial success for so long. Had this crisis happened while the share price was still in the ascendancy and revenues were looking fabulous, we may have had a different story. As it is, if you're the highest paid Chief Executive in the country and all you can offer is revenue flatlining with no prospect of a lift, then it's time to go or be pushed.

Now all the talk is around selling off parts of the business or streaming into breakaway companies. Commentators are lining up to suggest the holding company is too large and unwieldy. 

I'm not so sure. I suspect the story will go very cold now and there may eventually be some realignment of different business units. However, Sir Martin was famous for espousing the view that advertising, and the media, was following a trajectory of consolidation. There is little reason to believe that just because he is no longer in the hot seat that this trend will discontinue. 

I don't think his departure marks any asset stripping from private equity or wholesale spinning off of different parts of the business. 

However, what this whole episode has taught us that if you're the best paid Chief Executive in the country and the good times come to an end, so too does your career. 

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