WPP PLC (LON:WPP) chief executive Martin Sorrell has stepped down after 33 years at the helm of the advertising agency he founded amid an internal investigation into allegations of personal misconduct.
In late morning trading, WPP shares topped the FTSE 100 fallers list, down 5.3% to 1,125.5p.
Sorrell will be treated as having retired from the group, meaning the 73-year-old is entitled to receive payouts related to 1.6 million shares in a number of award plans that will vest over the next five years.
READ: WPP already has list of successors for CEO job if needed
The exact value of the payouts depends on the company’s performance but WPP’s current share price is about 1,160p, so the awards are worth £18.5mln at the time of writing.
He has not signed a non-compete clause, which means he is free to work for another company within the same industry.
Analysts at Liberum said: "We would not read too much into this given Sir Martin's age but, more importantly, that WPP is his creation and he would not want to do anything that would be seen as damaging the company. Sir Martin still owns circa 2% of the shares."
Sorrell, who was the highest paid boss of a FTSE 100 company, had rejected the claims against him of personal misconduct and misuse of the company’s money.
Sorrell says departure in 'best interests of the business'
In a letter to WPP staff published late on Saturday, Sorrell said the "current disruption" was "putting too much unnecessary pressure on the business".
WPP said the investigation into alleged misconduct had concluded and that it did not involve amounts that were material to the company.
In a statement on Monday, Sorrell said: "Obviously I am sad to leave WPP after 33 years. It has been a passion, focus and source of energy for so long. However, I believe it is in the best interests of the business if I step down now.”
WPP has started the search for a new chief executive.
Digital boss and COO to lead WPP in the interim
In the meantime, the reins will be handed over to digital boss, Mark Read, and chief operating officer, Andrew Scott, making them joint chief operating officers. Sorrell will be available to assist with the transition, WPP said.
Sorrell’s departure comes at a difficult time for the company as the industry struggles against tough competition from Google and Facebook.
In March, the group reported its worst full year performance since the financial crisis and forecast no growth for 2018, reflecting a reduction in spending from consumer goods giants.
WPP's future without Sorrell
The news of Sorrell's retirement has raised questions about the future of WPP and whether it will remain in its current form with more than 400 companies across 112 countries.
"We think there is a significant possibility that WPP will now sell its Data Investment i.e. Market Research unit, and possibly PR, but that the rest of the group will be kept," said Liberum.
"This should drive a closing of the gap between the valuations and performance of WPP and the other agencies."