WPP Shares Slump as Investors React to Surprise Departure of Sir Martin Sorrell
Sorrell gets ousted.

WPP Plc (WPP) shares fell sharply Monday as investors digested news that the CEO of the world's biggest advertising firm, Sir Martin Sorrell, is stepping down from the company he founded more than three decades ago amid accusations of personal misconduct and the misuse of company funds.

Sorrell revealed his intention to quit the group in a Saturday statement that referenced only the ad industry's "current disruption" that is "simply putting too much unnecessary pressure on the business, our over 200,000 people and their 500,000 or so dependents, and the clients we serve in 112 countries." However, WPP said earlier this month that it had been investigation allegations of misconduct against Sorrell, including those linked to company funds, charges which the 74-year-old rejected "unreservedly".

"The previously announced investigation into an allegation of misconduct against Sir Martin has concluded. The allegation did not involve amounts that are material," WPP said in a statement Monday. "In accordance with his at-will employment agreement, Sir Martin will be treated as having retired on leaving WPP, as detailed in the Directors' Compensation Policy. His share awards will be pro-rated in line with the plan rules and will vest over the next five years, to the extent Group performance targets are achieved."

WPP shares were marked 5.5% lower by mid-day in London and changing hand at 1,122.5 pence each, a move which takes the stock's 52-week decline past 35%.

Sorrell, who founded WPP in 1971 and turned the then two-man operation into the world's biggest advertizing firm through a seemingly endless series of leveraged mergers and acquisitions, was not only one of Europe's most visible CEOs, but also its highest paid, having earned more than £48.1 million ($68.7 million) in 2016 - more than double the final pay package of the FTSE 100's second-highest paid CEO, Carnival plc.'s Arnold Donald.

However, the group's recent fortunes have put both his leadership and his generous pay awards under increasing scrutiny, particularly after the stock had its biggest one-day decline in 20 years last month posted its weakest full-year sales since the financial crisis and warned that "fundamental changes" in the industry would likely mean little growth across the whole of 2018.

WPP said it would focus on restructuring its sprawling global business of digital and traditional agencies into a more comprehensive unit as it rides out a year in which it sees only flat sales and modest improvements on margins. Net sales for 2017 fell 0.9%, the group said, while like-for-like revenues fell 0.3%. The group also lowered its longer-term earnings per share growth forecast to between 5% and 10%, nearly have the pace it expected this time last year.

WPP's challenges reflect massive changes in the global advertizing market, where digital spending topped traditional TV ad buys -- by $209 billion to $178 billion -- for the first time last year, according to figures from IPG Mediabrand's Magna research division.

Magna said digital spends would grow 13% this year, more than five times the advance of television, and will likely comprise 50% of the total market by 2020.

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