Gideon Spanier: Founder’s syndrome can turn a boss’s dream into a nightmare

Gideon Spanier
REUTERS

The advertising and media industry has always been in thrall to founders. Entrepreneurs who set up successful companies make great “people” stories.

One of my favourite interviews was in 2015 with M&C Saatchi’s founders, Maurice Saatchi, Jeremy Sinclair, Bill Muirhead and David Kershaw, in their shared, private office — a seventh-floor eyrie with whitewashed walls and panoramic views at the top of their ad agency’s Soho home in Golden Square.

I happened to see the quartet on the day of their listed company’s annual general meeting, which was held directly after my meeting in the same room. Their private office was a curious venue for an AGM. Most public companies choose a more neutral and accessible location for shareholders (albeit M&C Saatchi is no FTSE giant).

It was a revealing moment. An important event had the air of a cosy club, even though M&C Saatchi’s co-founders owned only about a quarter of the stock.

Fast forward to 2020 and M&C Saatchi is reeling from an accounting scandal over revenue recognition and other “adjustments” that emerged last August.

Half the board, including Maurice Saatchi and three non-executive directors, quit after a bust-up with the other co-founders in December, the share price has fallen by three-quarters and the Financial Conduct Authority is investigating. A shadow hangs over this year’s 25th anniversary of M&C Saatchi and the 50th birthday of their previous agency, Saatchi & Saatchi, which Maurice and his brother Charles founded in 1970 and ran until a fiery exit in 1995.

The M&C Saatchi saga has yet to end but it looks like a classic case of “founder’s syndrome” after years of success.

Some of the qualities that mark out the founder or founders as special — their vision, passion and commitment — become weaknesses. They hold onto power for too long, defer succession planning and fail to ensure proper governance controls are in place.

Advertising and public relations are particularly prone to founder’s syndrome because so many people dream of setting up their own agency.

Two other Saatchi & Saatchi alumni lost control in spectacular circumstances. The late Tim Bell, whose memorial service takes place next week, saw his PR firm Bell Pottinger collapse in 2017 and Sir Martin Sorrell lost his job as WPP chief executive in 2018.

“Founding a company is the nearest a man can come to giving birth. Emotionally rather than physically obviously — but it’s your baby,” Sorrell has said.

Some of the canniest founders exit on their own terms. Sir John Hegarty, another Saatchi alumnus and the creative behind Audi’s Vorsprung Durch Technik ads, and his co-founders sold their agency BBH after 30 years in 2012.

James Murphy and David Golding, co-founders of Adam & Eve/DDB, which made its name with its John Lewis Christmas ads, left last year after a decade.

“What you need from founders is values and direction — not tablets of stone,” Murphy says. “You need to have a sense of values that informs the evolution of the business, not to have inertia.” Murphy and Golding are using some of their earn-out cash to fund a new agency as they seek a fresh “adrenaline” rush.

Beyond the agency world, Rupert Murdoch put investors ahead of his own family when he sold Sky and his Fox film and entertainment businesses in 2018.

Still, there’s no golden rule about how long founders should retain control or stay in charge.

Johnny Hornby, who co-founded agency group The & Partnership in 2001, has just struck a deal with minority shareholder WPP that involves selling shares to release £30m in cash — without giving up majority voting control.

Hornby and his management team have “recommitted” for five years and he talks of passing on their shares to a younger generation of staff.

History shows that founder-led or family-controlled firms can be among the best at making long-term strategic decisions and taking creative risks — a virtue in advertising and media where magic and flair are key to success.

But no business leader should have unlimited power without independent oversight, especially when shareholders’ money is at stake.

Questions about governance in the agency sector are nothing compared with the more serious issue of how to deal with the Silicon Valley tech giants.

Google’s owner, Alphabet, and Facebook are two of the world’s biggest companies whose founders own powerful voting shares that give them almost total control, even though their firms use the stock market to raise capital and keep expanding.

Sorrell has copied the tech founders by giving himself a special share that gets him a veto over key decisions in his new £1 billion agency venture, S4 Capital.

Founders are good for business because new companies drive innovation and growth. But investors should always beware founder’s syndrome.

Gideon Spanier is global head of media at Campaign