WPP’s largest shareholder has backed the chairman Roberto Quarta’s decision not to reveal the outcome of an investigation into the conduct of the founder Sir Martin Sorrell before an expected revolt at the marketing and advertising company’s annual shareholder meeting next month.
The influential shareholder advisory group Glass Lewis told investors this week it had “severe reservations” about a number of issues, including WPP’s failure to publish the outcome of the investigation into allegations of personal misconduct that prompted Sorrell to resign. It recommended voting against Quarta’s reappointment at the meeting in London on 13 June.
However, the activist investor Harris Associates, which owns an 8% stake in WPP worth more than £1.3bn, sided with Quarta, saying publication of the report was not important for the future of the business.
“We do not agree with Glass Lewis,” David Herro, a partner at Harris Associates, said. “In our view the release of the conduct report is not a critical issue.”
Last month, Quarta told investors at the company’s first-quarter results presentation there was “no requirement to disclose or necessity to disclose [the contents of the report]”.
It is understood that WPP has received legal advice that it cannot disclose the details of the allegations against Sorrell under data protection law.
Chicago-based Harris Associates, an activist investor with stakes in companies including Tesco, Lloyds Banking Group and Credit Suisse, said it was more focused on WPP’s hunt for a new chief executive in order to keep the embattled advertising giant on track.
“We are more concerned with an orderly succession process and the selection of an excellent and capable chief executive,” Herro said.
Some analysts have called for a break-up of WPP, which has said it will sell off billions of pounds worth of stakes in companies such as Vice and is considering offloading its research arm, Kantar, which has a £4bn-plus price tag. WPP’s share price is down more than 20% over the last year.
Glass Lewis also criticised the way Quarta, who is also the head of WPP’s nomination committee, had prepared for the departure of Sorrell, who founded WPP 33 years ago.
The advisory firm said: “Despite previous assurances we believe the nomination committee has failed to adequately prepare for the replacement of Sir Martin.”
WPP has always maintained there are a number of potential internal candidates, including the WPP Digital chief, Mark Read – who is co-running the business on a day-to-day basis alongside colleague Andrew Scott – as well as a “constantly refined list of external candidates”.
Tim Armstrong, the head of Oath, the Verizon subsidiary that owns AOL and Yahoo, has been cited as a potential successor from outside WPP.
WPP has said a vote against Quarta would be “against the interests of investors” at a time when WPP has no chief executive and “needs stability”.
