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Martin Sorrell walks from WPP but the statement is inadequate & stinks of a shabby fudge

By Tom Winnifrith | Monday 16 April 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

And so a drama played out by teams of lawyers and teams of spinners leaking material to the Sunday Papers is over. Sir Martin Sorrell has quit with immediate effect as CEO of media giant WPP (WPP) but we are none the wiser as to what exactly happened. The formal statement today - leaked so it could be spun to the Sundays, natch, begs real questions.

What we do know is that on April 3 someone, surely not connected in any way shape or form to Sorrell's boardroom enemies, leaked to the WSJ suggestions that he had misused company funds. We don't know exactly how and what the amounts were. But there is a clear principle at stake, if an executive misused company funds he should be fired even if it is just one cent involved. We do know the alleged sums were "immaterial". But that is no defence at all.

We were then told via Sorrell's spinners via poodle journalists that he did not know what the allegations were but was innocent. Next up we were told that he had been interviewed but was apparently still none the wiser about the allegations. Presumably the expensive legal interviewers running the company enquiry just asked Sir Martin about his summer holiday plans, whether he preferred hob nobs or chocolate digestives and who he thought would get relegated from the Premier League?

Finally we learn that the enquiry has been wound up and we will never be told what it discovered but that "for the sake of the company" Sir Martin has resigned. We are told that as a "good leaver" he will keep share options worth tens of millions of pounds. We are not told, though I cannot understand why, whether he will be paid any other compensation for loss off office. Since he resigned I would hope not but I assume otherwise.

This is highly unsatisfactory. The enquiry should have been allowed to run its course and shareholders who have taken a beating over the past year have every right to know the results. If Sir martin had been a naughty boy he should have been fired with no compensation and should have lost his share options - which will be dilutive - for ordinary, long suffering investors. If Sir Martin was innocent then a secondary enquiry into the source of the leak would have been needed for if it was to emerge that some of his fellow directors had left fingerprints they should have been given the order of the boot.

Instead we have a murky and muddy announcement which stinks of a shabby compromise which will see shareholders picking up the tab for at least three teams of lawyers, for the dilution of Sorrell's share options and for God know 's what else besides. In terms of corporate transparency and natural justice that is just not good enough.

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