Martin Sorrell has stepped down as chief executive of WPP WPP 0.49% PLC following the conclusion of an investigation into an allegation of personal misconduct, ending his more than three decades of leadership atop the world’s largest advertising company.
Roberto Quarta, chairman of WPP’s board, will take on the role of executive chairman until a new CEO is appointed, the company said. Mark Read, chief executive of WPP agency Wunderman, and Andrew Scott, WPP’s corporate development director and chief operating officer for Europe, have been appointed as joint-chief operating officers of WPP.
Mr. Sorrell’s departure is being treated as a retirement, the company said. The board is conducting a search for internal and external candidates for a new CEO with “no set time frame,” the company said.
“Obviously I am sad to leave WPP after 33 years. It has been a passion, focus and source of energy for so long,” Mr. Sorrell said. “However, I believe it is in the best interests of the business if I step down now.”
Mr. Sorrell’s exit is a shocking turn of events and a sudden end to the career of a man who had become one of the oracles of the advertising business. The 73-year-old Mr. Sorrell had been at the helm since he founded the company in 1986, helping to transform a little-known U.K. wire-shopping-basket manufacturer called Wire & Plastic Products into the largest advertising holding company in the world. It boasts a host of blue-chip creative agencies like J. Walter Thompson and Young & Rubicam as well as powerhouse media-buyer GroupM.
On April 3, WPP said an independent counsel had been appointed to look into “an allegation of personal misconduct” after The Wall Street Journal reported on the probe. The Journal reported that the board was looking into whether Mr. Sorrell misused company assets. WPP said the allegation didn’t involve sums that were material to the company. Mr. Sorrell at the time issued his own statement denying any financial impropriety. He couldn’t be reached for comment on Saturday.
The probe wasn’t related to client business, and the details of the investigation will remain confidential, the company said in a memo to WPP’s top executives.
“The investigation had no connection to or impact on our operations or clients. Our work for clients is unaffected and continues uninterrupted,” the memo said.
Mr. Sorrell’s successor will be left to navigate difficult straits. WPP’s stock has dropped more than 30% over the past 12 months following a string of disappointing financial results. In its most recent quarter, WPP logged its worst performance since the financial crisis, as net sales fell slightly compared with a year earlier. The firm said it is setting budgets for 2018 on the assumption of no growth in revenue and net sales.
Across the industry, the business model Mr. Sorrell pioneered by snapping up an alphabet soup of ad agencies is being called into question. Marketers are pressuring agency holding companies to revamp organizational structures that are out of step with the digital age. At the same time, marketing clients are cutting back on the fees they pay for ad services or taking more of the work in-house to save money and give themselves greater control.
WPP works on behalf of major marketing clients such as Ford Motor Co. , Unilever and Procter & Gamble Co. , the world’s largest advertiser. P&G has reduced marketing costs by about $750 million in recent years and plans to cut its agency and production costs by an additional $400 million over three years.
Moreover, ad companies have grappled with a scandal over the transparency of the industry’s ad buying practices, and the sector is dealing with the power of tech giants Facebook Inc. and Alphabet Inc.’s Google.
“As I look ahead, I see that the current disruption we are experiencing is simply putting too much unnecessary pressure on the business,” Mr. Sorrell said in a letter to WPP staff Saturday.
“That is why I have decided that in your interest, in the interest of our clients, in the interest of all shareowners, both big and small, and in the interest of all our other stakeholders, it is best for me to step aside,” he said.
Neither Mr. Sorrell nor WPP made any comment about the findings of the investigation. When the board’s probe was initially disclosed, Mr. Sorrell said publicly that he recognized the board had a duty to investigate the complaint and hired two law firms at his own expense.
Mr. Sorrell, one of the most highly paid executives in the world, isn’t walking away empty-handed. His stock option awards will be prorated and will vest over the next five years, based on the achievement of the company’s performance targets, WPP said.
Mr. Sorrell has played a huge role at WPP, cutting deals and micromanaging its far-flung operations. Mr. Sorrell has embedded himself into every aspect of the business from coming up with M&A targets to wooing marketers.
“It’s hard to imagine WPP without Martin. Everything that we do has his stamp on it,” one WPP executive said.
WPP said Mr. Sorrell would be available to assist through the transition.
Mr. Sorrell never penned a jingle or crafted a TV commercial, but the cerebral, finance-minded executive rose to the top of Madison Avenue by being an astute serial acquirer, buying up firms across advertising, marketing, public relations, media, research and technology.
He has not only been the face of WPP, but the face of the advertising business. Mr. Sorrell is a fixture at events where the business elite gather from the World Economic Forum in Davos, Switzerland, to Allen & Co.’s media summit in Sun Valley, Idaho. Business leaders around the world have sought his advice on broader economic trends.
Today, the ad giant has a market value of £15 billion ($21.3 billion) and employs more than 200,000 people, including associates and companies in which WPP has an investment, in more than 112 countries. More than 400 companies are part of WPP.
Corrections & Amplifications
Mark Read and Andrew Scott have been appointed joint-chief operating officers of WPP. An earlier version of this article incorrectly stated that they had been appointed joint-CEOs. (April 14, 2018)
—Alexandra Bruell contributed to this article.
Write to Nick Kostov at Nick.Kostov@wsj.com and Suzanne Vranica at email@example.com