When it comes to a company the size of WPP, what is an amount that is 'not material'? I only ask because, in the flurry of gushing tributes following Sir Martin Sorrell’s resignation as chief executive of the business he founded 33 years ago, it’s easy to forget the catalyst for his departure.
WPP had launched an investigation into an allegation of personal misconduct against Sir Martin. Granted, he emphatically refuted such a suggestion, but nonetheless the board appointed dispute resolution specialists Wilmerhale to conduct an independent review. (The first Sir Martin apparently knew of the allegation was when he was summoned to a meeting to find Wilmerhale waiting: no warning.)
Wilmerhale is no slouch when it comes to high profile cases: last week, the law firm advised Facebook’s Mark Zuckerberg on his testimony to Congress and, back in the day, represented President Nixon against the US Supreme Court and also Enron’s board against its finance director. I also have no doubt that its services do not come cheaply.
The findings of the investigation were apparently due to be revealed to the Board this week, but Sir Martin’s departure – which allows him to retire with all the benefits of his pension pot – has diverted attention from an important point. WPP’s statement confirmed that the investigation had concluded and that the allegation ‘did not involve amounts that are material’. But, importantly, it does not say that Sir Martin had been cleared of any or all of the charges.
So, I ask again, what is material? WPP’s most recent annual report (2016) reveals Sir Martin received total compensation of £48.1 million that year, which makes his £228,000 expense allowance look like loose change. When a company generates annual pre-tax profits in excess of £2 billion and rewards its founder so handsomely – indeed defending his much criticised remuneration package so robustly in annual meetings over the past five years – what is the straw that finally breaks its back? If the sum is not material, perhaps it is what it was spent on that is?