Interpublic Group of Companies could be broken up and sold off after it failed to block a shareholder proposal calling for the company's sale.
IPG, which owns networks such as McCann Erickson, Lowe and Foote Cone & Belding, had asked the Securities and Exchange Commission to keep the proposal, made by the shareholder Charles Miller, off the agenda at its 2005 annual general meeting.
Miller's "maximum value resolution" calls on the board of IPG to arrange for the holding company's "prompt sale". The SEC refused IPG's request to block the resolution because it did not believe the holding company's arguments against the proposal were strong enough.
The move follows IPG's admission last week that an internal investigation into accounting irregularities had revealed instances of employee misconduct, record falsifying, inappropriate customer charges and the misappropriation of assets - activity that is believed to have mostly taken place in the European offices of the McCann Erickson network.
IPG claimed that it had either fired or was in the process of firing those members of staff responsible who had remained at the company.
In addition, IPG stated that it expects to meet its 30 September deadline for filing its 2004 full-year and 2005 first-half financial results. Failure to do so could lead to IPG being delisted from the New York Stock Exchange.
The company added that it intends to restate its earnings for between 2000 and 2004 and cautioned that its previous financial statements should not be relied upon.
IPG's accounting troubles came to light in August 2002 when the company uncovered $68.5 million-worth of charges that hadn't been properly expensed.
The revelation forced the company to restate five years' worth of earnings and caused the SEC to launch an investigation that was expanded earlier this year.
As part of last week's announcement, IPG's chairman and chief executive, Michael Roth, said: "I have been clear since assuming my current responsibilities that our top priority is to fix our financial controls and leave accounting issues behind us. The comprehensive review of our financial results and processes that we have undertaken is consistent with this objective."
- Leader, page 22.
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