WPP has been fined a chunky $19m by America’s Securities and Exchange Commission (SEC) for failing to ensure some of its overseas subsidiaries met accounting regulations. The offences pre-date 2018 when the current WPP regime headed by CEO Mark Read took over.
The SEC says WPP “implemented an aggressive business growth strategy” which failed to ensure local advertising agencies met its accounting standards. It goes on: “The order finds that WPP failed to ensure that these subsidiaries implemented WPP’s internal accounting controls and compliance policies, instead allowing the founders and CEOs of the acquired entities to exercise wide autonomy and outsized influence.”
The markets include Brazil, China, India India and Peru. The payment comprises $10.1 million in disgorgement, $1.1 million in prejudgment interest and an $8 million penalty.
The SEC also says WPP: “failed to promptly or adequately respond to repeated warning signs of corruption or control failures at certain subsidiaries.”
WPP says: “The Commission’s findings relate to control issues as well as the acquisition and integration of companies in high-risk markets until 2018. As the Commission’s Order recognises, WPP’s new leadership has put in place robust new compliance measures and controls, fundamentally changed its approach to acquisitions, cooperated fully with the Commission and terminated those involved in misconduct.”
There’s a parallel here with events at M&C Saatchi which also got into hot water over the way it accounted overseas subsidiaries, indicating the problems faced by rambling ad groups which, in some cases, have acquired hundreds of agencies.
Sir Martin Sorrell, replaced as chief executive by Mark Read in 2018, says: “I had no part or involvement in the settlement between the SEC and WPP. My personal commitment to compliance and controls during almost 50 years of value creation has been rigorous and remains so. I note there have been terminations of only certain senior executives and other employees at WPP involved in the misconduct as a consequence. I left WPP as a good leaver as its statement of April 14, 2018 made clear.”
Which doesn’t really get us very far.