Interpublic wields axe as bad news deepens

David Bell, Interpublic's newly installed chief executive, was this week preparing to unveil a downbeat set of year-end results, beginning what is expected to be an effort to get all the embattled group's bad news out of the way as quickly as possible.

At the same time, John Dooner, who has handed over the Interpublic helm to Bell, is said to be planning high-level management changes at McCann-Erickson in the wake of his return to his old job as boss of the group-owned network.

Dooner was last week asked to step down and return to McCann to replace Jim Heekin, who has been made to pay the price for a disappointing recent performance by McCann. This was highlighted by the departure of millions of pounds worth of Coca-Cola business into Berlin Cameron Red Cell.

The board asked Dooner to switch roles after concluding that he was much better at running a network than a public company. "Dooner loves agencies but talking to twentysomething analysts isn't his thing," an industry source said.

Board members are also understood to have agreed that the momentum McCann had established under Dooner had been lost under Heekin, who did not have his predecessor's rapport with senior clients. Heekin is said to have been enraged by his sacking and to have complained to associates that he has been made a "fall guy".

Bell, described as quiet, unassuming and thoughtful, is seen as the logical choice to replace Dooner. Not only has he already had charge of a public company, True North, but is untainted by Interpublic's recent past and has the confidence of Wall Street. "This is a totemic appointment," an insider said. "It's an attempt to sweep an era away."

The changes at the world's second-largest communications group take place against the background of a Securities and Exchange Commission probe into £115 million of accounting errors in McCann's European operations, which stretch back several years. Meanwhile, the value of the group's expensive acquisitions has plummeted, and its credit rating dropped almost to junk status.

Interpublic has already been looking at the compensation packages for senior executives within its operating companies and investigating whether profits were artificially inflated to trigger bonuses.

A major surprise is the Interpublic board's confirmation that Sean Orr, the group's chief financial officer, will keep his job. Insiders say he will not be moved while the £350 million sale of NFO WorldGroup, Interpublic's market research specialist, is pending because it would send the wrong message to the SEC.

Nevertheless, Interpublic sources insist the changes have not been precipitated by the impending SEC report. "What's happened was a commercial imperative," one said.

Bell's hopes at drawing an early line under the bad news have been given a boost by the belief among the Interpublic chiefs that the SEC report will reveal nothing about the group that isn't already known.

His immediate priority will be to reassure the group's US-based multinational clients who have become ultra sensitive to corporate governance issues after the Enron and WorldCom scandals. However, senior executives believe mass defections are unlikely. "Moving networks is a very difficult thing to do if you're a big client," one said.

In addition, Bell will be looking to help balance the books via the sale of NFO while insisting Dooner make the recapture of the missing Coke business a priority in his efforts to stabilise McCann.

The Interpublic regime change is also likely to lead to renewed scrutiny of its Lowe network. Insiders acknowledge that the group underestimated the time it would take to bed down the merger between Lowe and the then Ammirati Puris Lintas.

Moreover, there is ongoing concern about the performance of the Lowe agency in London, which last year lost its £43 million Orange account and its dominant position on General Motors' Vauxhall roster.

"There have already been some changes in London and there may be more," an Interpublic source warned.

- Stuart Elliott, p21.