Bob Willott: editor of Marketing Services Financial Intelligence
Bob Willott: editor of Marketing Services Financial Intelligence
A view from Bob Willott

Think BR: How does one keep an entrepreneurial lion under control?

Bob Willott asks whether the current controversy over Sir Martin Sorrell's reward package should focus less on the amount paid and more on how shareholders can exert constructive influence on entrepreneurs.

The controversy that has been fuelled by those objectors to Sir Martin Sorrell’s big reward package who are threatening to vote against it this week seems to be part of a wider movement to attack entrepreneurs who have built up impressive companies, sold the majority of the shares to the wider public and yet are perceived by some as behaving as if the company was still their own.

Whether such a perception accords with reality at WPP merits further debate, but before doing so it is worth noting several more explicit examples among other companies of "It’s my company so I’ll behave how I want to".

First we had Mark Zuckerberg selling off a slice of Facebook to the public while ensuring that no-one could ever outvote him afterwards. So much for public ownership.  

Then we had a very different example. Lord Bell and Piers Pottinger decided they had had enough of running Chime Communications under the public gaze and instead would like to take the majority of the group’s public relations subsidiaries back into their own private ownership.

Even the News Corporation phone-hacking saga has drawn out hints of autocratic management that has put its business conduct and its founder’s behaviour under the spotlight.

These companies may have very little in common with each other apart from one essential fact - they have succeeded so far because of the entrepreneurial flair of their founders. And entrepreneurs grow accustomed to calling the shots. Indeed their propensity for taking risks, their leadership qualities and their commercial nous probably entitle them to do so.

Britain would never have grown into a great international commercial power if it had not provided a breeding ground for entrepreneurs centuries ago. 

Many were risk-takers who dominated their employees and bullied anyone else who got in their way, for better or worse. But the best succeeded in building impressive businesses, and we still need more of their like today.

So how do we get the balance right? There can be no avoiding the fact that, once an entrepreneur decides to share ownership with a wider public, he or she will have to behave rather differently from when the company’s shares were held privately.

Such a change of behaviour needs to recognise that outside shareholders not only have the right to vote but also deserve to know as much as possible about what they are voting on - and for their views to be listened to.

It’s not good enough to assume that the remedy for unhappy public company shareholders is to sell their shares. It may not be an ideal time for such action and why should they? The directors are appointed by the shareholders, not the other way round.

The promoters of the Facebook IPO probably should never have agreed to the surrender of outright control to Zuckerberg. The shareholders in Chime Communications should probably not agree to the sale of a part of the business to Lord Bell and Piers Pottinger unless that part is manifestly without hope of generating solid profits in the future. Interestingly, that view seems to be shared by Sir Martin Sorrell, whose company WPP is a major shareholder in Chime. 

So on the one hand, as a shareholder Sorrell is trying to influence attempts by another public company to divest a supposedly valuable part of the business to its senior executives, but on the other hand he doesn’t seem to think his own shareholders should have too much say about how much he earns.

Bob Willott is editor of Marketing Services Financial Intelligence