MAURICE SAATCHI LOSES SHOWDOWN IF HE SWALLOWS HIS PRIDE, CO-FOUNDER CAN RETAIN A ROLE

By Published on .

LONDON-Maurice Saatchi, extravagant co-founder of the world's fifth-largest agency holding company, was ousted as chairman last week by indignant shareholders weary of his lavish lifestyle.

During a grueling eight-hour meeting at Saatchi & Saatchi Co.'s headquarters on the dingy fringes of Soho, the board of directors also decided to remove Mr. Saatchi from the board and to erase his name from the company he and his brother Charles founded 24 years ago. In an ironic coincidence, for-mer Chief Executive Robert Louis-Dreyfus resigned from the Saatchi board during the meeting.

"It's shareholder's revenge," said Dean Witter Reynolds analyst James Dougherty of Mr. Saatchi's ouster. "His trampling over the shareholders all these years has come back to haunt him."

If Mr. Saatchi can swallow his pride and accept the lesser-but still important-new role as chairman of the agency unit that bears his name, it makes a lot of sense for the company, clients and Mr. Saatchi himself, observers say. That job now is held by Edward Wax, and neither he nor Mr. Saatchi could be reached for comment. The board of directors also offered Mr. Saatchi the joint presidency of the company along with his reclusive brother.

The other burning question is how clients, particularly M&M/Mars, will react.

"You have to assume the dissident shareholders felt this move would have no impact or that the impact was worth the risk," an industry executive said. "Still, it remains to be seen what clients think as opposed to what the people in this little meeting believed they'll think."

Privately, clients say they are annoyed that the agency is incapable of settling disputes quietly and feel some sympathy for Mr. Saatchi, even before his ouster from the holding company.

"How much dirt does Maurice have to eat?" asked one client, referring to Mr. Saatchi's frequently slashed salary, his brother's from Saatchi's board a year ago and the cost-cutting closure of a lavish corporate headquarters earlier this year.

British Airways, a $135 million client, has already registered its disapproval in a letter last week to dissident shareholder David Herro.

It was Mr. Herro, senior portfolio manager at Chicago-based Harris Associates who claims to speak for close to 40% of the shareholders, who led the forces against Mr. Saatchi.

The successful rebellion by a group of largely U.S.-based institutional investors was triggered by a ludicrously generous new stock option proposal-based on Mr. Saatchi's old salary of nearly $1 million a year rather than his current more modest $300,000. The plan would have netted him up to $7.5 million if Saatchi's share price doubles in three years.

Shareholders' ire was intensified by Architectural Digest's January issue, with six glossy pages detailing the lavish lifestyle of Mr. Saatchi and his wife, Josephine Hart, author of the best-selling novel "Damage." The feature pictured them in one of their four homes, an "abbeylike" Sussex mansion complete with chapel and an elaborate ornamental lake created by flooding 13 acres of pasture.

The triumph of ego and greed over common sense has been a recurring problem for Mr. Saatchi since he first shook shareholders' faith by trying to add a $4 billion bank to his 1980s acquisitions binge.

This time, the angered shareholders won every demand they put to Saatchi's divided board of directors. They asked Mr. Saatchi to be moved out of the holding company and for the company's name to be changed to anything but Saatchi.

For now, the third member of the triumvirate who founded the agency in 1970-Deputy Chairman Jeremy Sinclair-will serve as chairman while a permanent replacement is sought. Mr. Sinclair was probably Mr. Saatchi's staunchest defender at the board meeting.

Secrecy surrounded the meeting, which Saatchi unsuccessfully tried to keep from the media. A handful of photographers and reporters armed with mobile phones huddled in 30-degree weather outside the Carpenter's Arms pub across the street.

The showdown spotlighted the still-simmering feud between Mr. Saatchi and Chief Executive Charles Scott, the clear favorite of the company's bankers and investors.

Mr. Scott did not need to take direct action to move Mr. Saatchi out of the holding company. In fact, he even appeared to offer him at least lukewarm support before the meeting.

"Charlie [Scott] is brilliantly not sticking his neck out because other people are doing it for him," said one advertising executive close to the situation.

Mr. Saatchi tried to protect his corporate standing by becoming a more high-profile agency figure this year, particularly in the U.S.

But in the end, it was what the board thought, not how clients or staffers felt about Mr. Saatchi.

"They canvassed a number of shareholders beyond those whose names have appeared in the press, and the feeling about Maurice was so definitive that there was no choice but to take this action," said another industry executive.

Melanie Wells in New York and Juliana Koranteng in London contributed to this story.

In this article:
Most Popular