Why Sir Martin Sorrell’s New Deal Isn’t Such a Big One

Sorrell understands that the fickle consumer is in the driver’s seat and that requires new ways of marketing. He is smart, intrepid and unleaderable and he knows that shareholder value is a result not a strategy.

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Why Sir Martin Sorrell’s New Deal Isn’t Such a Big One

Article, June 4th 2009, AgencySpy.com

http://www.mediabistro.com/agencyspy/opeds/dean_crutchfield_on_why_sir_martin_sorrells_new_deal_isnt_such_a_big_one_118218.asp

By Dean Crutchfield

Oscar Wilde once mused that “to know the price of everything was to know the value of nothing”. Our cogitation surrounding Sir Martin Sorrell’s $96M remuneration package is a fascinating debate about perceived value.

As an industry we bring tremendous value: brands are a businesses greatest asset promulgated by the rampant rise in the value of intangible assets. In 1982 the net tangible assets on the Balance Sheets of the companies comprising the S&P 500 accounted for nearly 90% of their value, by 2005 it was only just over 20%. So if today the value of the S&P is approximately $11.5 Trillion that means $9.2 Trillion is intangible and within that sum, WPP’s BrandZ study estimates the brand value is $2 Trillion! It is no coincidence that this all has happened whilst the marketing industry blossomed from the mid 80’s e.g. Omnicom and WPP both started 1986.

Sir Martin Sorrell had a vision to build a full-service, global-marketing company to serve worldwide clients and in 1986 he acquired an already publicly listed company called Wire & Plastic Products. Having been the CFO for Saatchi and Saatchi for a number of years, he understood that advertising was being usurped. Ad agencies needed to ameliorate the rebellion from clients who refused to keep paying ad agencies 15% commission so he moved to a fee-based model. It was also a category whose effectiveness was being diluted by technology that gave consumers more choices and tools that avoided ads. Sorrell knew the simplest answer was to act. With an appetite for acquisition he acquired fee-based service businesses such as branding, public relations, event marketing, digital, direct mail and research firms. He was also the first to really make in-roads East, adding companies and clients in Asia as well as Europe, the Middle East and South America.

I have a Financial Times article from 1997 with an interview with Sir Martin in which he talks about the challenge of getting 50,000 employees to face in the same direction. Today it would seem he has accomplished that goal with a $13.6B global powerhouse that has over 125,000 employees and 141 businesses in over 100 countries that derives more than half its income from marketing rather than advertising.

For most of us, we all want success, we all want it now and we all want it big and Sir Martin has matched all three splendidly. But is he worth it? I believe he is and I admire what he’s achieved and I have no problem with him being incentivized to keep growing WPP with $96M over 5 years if you compare that with mainstream corporate execs.

Just take a glance over the last several years and you can read stories of profligate excess, from Tyco’s Dennis Kozlowski, Computer Associates Charles Wang’s $1B share binge, New York Stock Exchange paying departing Dick Grasso $140M, Robert Nardelli getting $221M for failing at Home Depot and a tidy exit package for failure of $200M for Hank McKinnell of Pfizer.

Once again excessive executive compensation has taken center stage since the taxpayers bailout of banks that began in September 2008. We have all expressed genuine outrage as CEOs and other executives responsible for the financial crisis have pocketed millions of dollars.

Last year, the biggest CEO payouts for failure took place on Wall Street: Citigroup’s CEO Charles Prince got a bonus of $10 million, allowed him to keep $28 million worth of stock and options and granted him $1.5 million in annual perks. And at Merrill Lynch, CEO E. Stanley O’Neal walked away with a $161 million package!

He might be known as Machiavelli on Madison Avenue, but Sir Martin is not asking for a payout for failure. With him leading the way, a tsunami of consolidation has swept advertising, and now WPP and four other giants together represent 60% of all U.S. advertising dollars. Some complain that creativity in marketing and advertising has been hijacked by big business seeking world domination. I’m often concerned to hear this disappointing cynical view of ‘big business’. To be blunt, it is only businesses big and small that create the jobs and the incomes which give us all an opportunity to live better, feel better and get more out of life – and do some great work in the making.

Sorrell understands that the fickle consumer is in the driver’s seat and that requires new ways of marketing. He is smart, intrepid and unleaderable and he knows that shareholder value is a result not a strategy.

Why do I believe he should earn $96 Million over five years? First, because there’s a big question surrounding whether giant companies like WPP, Omnicom, Publicis, IPG, etc can inspire creative people and convince Wall Street that size and synergy can work. If it doesn’t we’re all in trouble. So we need a champion who is prepared to be a lightning rod figure that can charge into the fray.

Second, because the marketing industry needs big earners so that we are taken seriously as a “Business” – it provides a level of credibility. And Sir Martin accomplishes it with a determination, self-reliance and degree of success that is particularly notable.

Third, just to get some venting started and hurl some stones at the Marketing glasshouse so that the crash of glass might not be heard, but the desired effect is a series of deafening explosions amongst us.

Author: Dean Crutchfield

In an award-winning career spanning two decades, Dean Crutchfield has created, built and re-invigorated some of the world's most iconic brands.

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