WPP boss Martin Sorrell: Global chief execs need to stop listening to Deloitte and Accenture and take a long-term view

 
Oliver Gill
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Sir Martin Sorrell has been chief executive of WPP since 1986 (Source: Getty)

WPP boss Martin Sorrell today took a potshot at the short-term outlook taken by global chief execs – an approach that led to the global advertising giant reporting its weakest revenue growth since the financial crisis.

The 72-year-old, one of the longest-serving FTSE 100 bosses, also said WPP had been hurt by a new breed of shareholders keen to persuade companies to cut advertising spend.

FTSE 100 and S&P 500 boss life expectancy averaged six to seven years, WPP said. And 100 per cent of earnings are being paid out in dividends, compared to 60 per cent in 2009.

WPP said boards are “abrogating responsibility for reinvesting retained earnings back to share owners”.

Sorrell told City A.M.:

It’s not the shareholders that are getting too greedy. It is the focus on the short-term and dividends and buybacks.

He added: “The low cost of capital that is creating pools of money for activists and zero-based budgeters to acquire interests in companies or acquire them fully, puts pressure on them [CEOs] to reduce costs.”

Read more: WPP has cut its forecasts again

Packaging

WPP revealed third-quarter revenue had fallen 0.4 per cent on a constant currency basis and said it would need to downgrade revenue growth for the third time this year.

Sorrell said activists had a “very significant” effect on current performance.

“And it has had a very significant effect on packaged companies in particular, which account for about 30 per cent of our revenue base,” he said.

WPP has lost two big accounts with AT&T and VW during the quarter, with consumer goods firms Unilever and Procter & Gamble reducing their spend.

Sorrell said: “Consultancies do make some inroads… [when] they go to CEOs of companies and say: ‘You are spending too much, we’ll try and rationalise the spend or reduce the spend if you pay us a contingency fee, a fee based on results.’”

Consulting giants Accenture and Deloitte were singled-out by Sorrell as “the ones that we seem to bang heads with the most”.

The WPP boss said the rise of direct advertising through tech giants such as Google and Facebook did not have as big an effect on earnings.

“We distribute about $7bn (£5.3bn) of media spend on Facebook and Google,” he said.

Read more: WPP targeted by short-selling hedge fund

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