For John Wren, Omnicom's chief executive, and his finance chief, Randall Weisenburger, this may well be that moment. Once the most admired holding company in the advertising universe and distinguished by its belief that a business should be creatively led, Omnicom has seen its shares pummelled following an article in The Wall Street Journal on 12 June.
The story drew attention to three areas. The first relates to measuring organic growth with the suggestion that Omnicom's methods flatter its overall performance. The second concerns how Omnicom has treated write-downs of its online investments. Cannily, it houses these investments in a separate company called Seneca, which has helped the group to avoid write-downs and boost profits. (By contrast, the UK-based WPP has had to fully recognise the losses on its new-media ventures through its overall profit and loss account.) The third relates to accounting for earn-outs. As many an exhausted chief executive will testify, earn-outs tie in key individuals following acquisition of their companies by delaying full payment for the business over several years. Now there is another fresh turn in the tale, as questions arise about the credit standing of Omnicom agencies with media owners (see p1).
This story has everything. Money. Vast personal fortunes at risk. Heavy insider shares selling over the past 12 months. Reputations on the line.
Shock resignations at board level. Law suits by the dozen (see p16). Fevered speculation. Everything, in fact, except, evidence of actual wrongdoing.
Nonetheless, the overall conclusion remains the same: that although it has not infringed US accounting standards and will probably still command a premium rating after this affair has been dealt with, the consistent and aggressive use of such policies has aided Omnicom's performance. This propensity to push the limits of the law, however modest, has turned out to be the miners' canary necessitating the release this week of a 48-page rebuttal document to investors.
But even Omnicom's worst enemies do not expect the company to die from its current crisis. Indeed, everyone is keen that it should live and prosper because the whole sector will benefit from its return to health. But in future, Omnicom may have to rethink its tactics. Until now it has made a virtue of being cast as a brilliant financial accounting vehicle interested solely in the independent development of its agencies. WPP, by contrast, has been cast as a meddler, striving to act as both a financial powerhouse and to add value by various methods to its combined agency brands. Now WPP looks pretty smart and we are left with a question: if Omnicom is not a brilliant financial accounting vehicle, as current instability suggests, then what is it there for?