Succession planning for companies run by charismatic founders isn't easy. The very identity of the business is tangled up with the person, and boards are usually too deferential.
This is especially true at the world's biggest advertising company, WPP. CEO Martin Sorrell created the company 31 years ago by buying a British maker of wire baskets and using it to roll up dozens of agencies that do everything from creative work to market research.
When asked about succession, Sorrell -- a spry 71-year-old who shows no signs of slowing down -- often says he'll carry on as long as he can before someone "carts me off to the glue factory." Beyond wisecracks, he's given few hints about how he sees WPP's future, nor a timeline for his departure. When you've just been paid an annual sum of 70.4 million pounds ($102 million), why hurry?
But, as with his dizzying remuneration, the question of succession vexes investors. The unenviable task of sorting it out falls to Roberto Quarta, a veteran private equity man who took over as chairman a year ago. It would help if Quarta brought the search process into the light. Under his predecessor, discussion of succession planning was limited to a few unenlightening paragraphs in the annual report.
Quarta, who faces shareholders on Wednesday at WPP's annual meeting, needs to do more. Last year a big shareholder used the same meeting to voice misgivings about the "Sorrell-centricity" of WPP. One way to counteract that would be to give shareholders better access to the heads of the various agencies and units that make up WPP, since it's from their ranks that a successor may be plucked.
So far, Sorrell has resisted putting names out in public over fears that it would pit people against each other and be bad for morale.
It is a risk. Just look at how WPP's rival Publicis has anointed several dauphins to replace 74-year old CEO Maurice Levy, only to see them depart with no explanation. (Recruiters in Paris describe advising Publicis on his replacement as "Mission Impossible".)
Quarta acknowledged the problem in his first chairman letter in WPP's annual report, saying that he "understands shareholders request for greater transparency." He tried to reassure by saying that the board had identified a "strong pool" of internal and external candidates and met three times last year on succession.
Sounds great, but shareholders are being asked to take him at his word. Questions abound: should WPP's structure change when Sorrell leaves? Would it make more sense to appoint co-CEOs or some other arrangement given WPP's unwieldy size and fractured makeup (held together for now by Sorrell's forceful presence)?
These questions are urgent given that business is mutating rapidly as more ad dollars move to the internet. WPP and its rivals must defend their role at a time when trust between the big brand-owners and the ad agencies is at a low ebb. The big-four ad companies WPP, Omnicom, Publicis, and Interpublic face new digitally-savvy rivals from Google and Facebook to Accenture and Deloitte. Three of the four have CEOs over 70, with Omnicom's John Wren a relative youngster at 63.
Nobody wants to push Sorrell out the door too soon. His mastery of the ad world has helped WPP deliver industry-beating returns and it's hard to see him willingly giving up a role that lets him expound on everything from Brexit to the economy.
But investors are right to worry about what will keep the WPP empire together once its master-builder moves on. Talking about who comes next shouldn't be taboo.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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