Global expansion without adequate controls is asking for trouble. That’s the lesson of a $19 million settlement between WPP, the world’s largest advertising agency, and the U.S. Securities and Exchange Commission to resolve alleged violations of the Foreign Corrupt Practices Act.
According to an SEC order memorializing the settlement, WPP’s trouble began when it launched a rapid worldwide growth strategy, acquiring locally operated ad agencies around the world, including some in what the SEC calls “high-risk markets,” like China, Brazil, India, and Peru. The order emphasized that, in purchasing the local agencies, WPP allowed the agencies’ founders to remain in control, an approach that increased the risk that the agencies would continue to operate as they did before being purchased.
There is no allegation in the SEC order that WPP corporate headquarters knew of the subsidiaries’ practices when it purchased them. But, a purchasing company will invariably be held responsible for what happens after it assumes control, and WPP was deemed liable for the post-acquisition conduct of its subsidiaries and for failing to implement adequate internal controls.
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