Struggling Cordiant ready to replace CEO

Katherine Griffiths
Thursday 19 December 2013 06:10

Cordiant, the struggling advertising and public relations group, is set to announce on Friday that its chief executive, Michael Bungey, will step down within the next six months.

The company is likely to say that the move was decided last year as part of the company's succession planning. But Mr Bungey has come under severe pressure in recent months from shareholders as Cordiant's share price has almost halved from 103p to 55.5p.

Mr Bungey is expected to be replaced by David Hearn, the chairman and chief executive of Cordiant's main advertising arm in New York, Bates Worldwide. Mr Hearn could become the group's chief operating officer, and then replace Mr Bungey. Cordiant would not comment.

In common with other companies in the sector, Cordiant has been hit by the worldwide downturn in advertising revenues. It has already reduced its headcount by 17 per cent and is likely to make further cuts.

WPP, the world's biggest advertising group, has also demonstrated that times continue to be tough, having reported a 17 per cent fall in half-year profits.

Critics say Cordiant's woes have not been caused by a market downturn alone. The UK fund Active Value, which aggressively invests in companies and then agitates for change, is thought to want to call an extraordinary general meeting to press for management change.

Active Value has a 9 per cent stake in Cordiant and wants management changes after the company lost a number of high-profile accounts.

The strategy might be undermined by Cordiant's decision to pre-empt an attack by sacrificing Mr Bungey.

David Herro, Cordiant's largest shareholder, this weekend said he sympathised with some of Active Value's criticisms. But Mr Herro, a Chicago-based fund manager with a 10 per cent holding in the company, signalled that he was satisfied with the remedial action Cordiant's board was taking.

Against this backdrop, Charles Scott, Cordiant's chairman, will attempt on Friday to give an upbeat assessment of the company's prospects along with its half-year results.

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