Q&A: IPG's Michael Roth


January 2007 marks the second anniversary for Michael Roth as Interpublic Group. For most of his tenure, the 61-year-old CPA has grappled with multiple accounting problems and financial restatements. Citing that the company is now in turnaround mode, Roth said he looks forward to the day when the word "beleaguered" is no longer "part of the IPG name."

In a wide-ranging interview last Wednesday, the former CEO of MONY discussed his management style, his biggest disappointment and how he learned the ad business while "under fire." Late last week, IPG was dealt another blow when Wal-Mart retracted its selection of DraftFCB, a move Roth described as "disappointing" in an internal staff memo.

Q: I have to start off by addressing the recent Publicis chatter. I've read your internal memo in which you say there's nothing to it and urged your people not to let this be a distraction. But I understand that Maurice [Levy] reached out to you to dispel the rumors as well. Can you discuss what he said to you?
 No, I can't. I meet with all our competitors and everyone has their own thoughts and views on what makes sense for their own companies. But my reaction is very simple. Our board has been very clear that the best way to enhance shareholder value is for us to put our heads down and go to work and that's what we're going to do. A lot of people would like to see them acquiring assets of IPG, because we have such great assets. Some people would like to see them acquiring IPG, but right now we've been very pleased with the progress we're making and it's being reflected in our share price. We'll deal with outside factors as they come.

How would you characterize IPG's performance in 2006?
I'm very pleased with our results for 2006. What a difference a year makes. My meetings with our shareholders, with the analysts, and with potential investors have been a lot different now that we're on the front foot instead of the back. I think this year we've made great progress in bringing our revenue back to a positive trajectory. We had to make up some client losses of 2005, and our commitment and our hope was for 2006 to have organic growth slightly up and I think we're on track to do that. Certainly the third quarter was indicative of that. We had to stabilize our client relationships and some of our networks. I think we've made great progress in that. We've committed to being Sarbanes-Oxley compliant at the end of 2007 and we're on track to do that. And we're winning new business. But we still have work to do.

Regarding new business, I understand the selection of DraftFCB by Wal-Mart (your biggest win this year) is likely to be overturned following the abrupt departure of Julie Roehm. What can you say about that?
I don't know anything about that. I can say that we are working with the client. We're having meetings. They're not commenting and I'm certainly not commenting beyond saying we have not been notified of anything like that. [Editor's note: IPG was informed the following morning that DraftFCB was out and Wal-Mart would hold a new review.]

I realize you're putting new financial controls in place, but I have to ask, why did we see so many restatements?
Because, first of all, the world changed. The reporting process changed. Sarbanes-Oxley changed. The whole game changed. What was normal in the old days is not acceptable now. And unfortunately we were leading the pack in terms of going through this. And look, just pick up the newspaper today, you see these restatements every day. It's sort of become normal.

Wait a minute, it's generally one restatement for those companies you're referring to. You guys broke some sort of record. Why couldn't you get this right earlier?
When you pick up a rock and something crawls out, you pick up another rock and something else crawls out. When you have material control weaknesses, this is what happens.

There are still two areas of concern that the analysts talk about. One is the professional cost associated with cleaning up the financial issues. The other is what some would consider exorbitant severance packages, like the one for [FCB's Steve] Blamer. How do you address the concern that those costs are draining the bottom line?
I think those are costs of doing business. They're not recurring costs and whenever you're in a turnaround, you're going to have non-recurring costs. Obviously, I'm looking forward to the day when we're on a more normalized plane, both with respect to our financial controls and with respect to our earnings. I want to make this a normal company. That's my main goal.

But some of those costs, like that particular severance package, were extraordinary.
Severance is part of this business. We make decisions in real time and I hope we get credit for the fact that we are making decisions from a strategic point of view, whether it be with people or with respect to structure. We're not afraid to admit when something isn't going right and to change it. We're going to make those hard decisions and it may cost us some money. It may not.

I would imagine that another one of those hard decisions was dismantling IPG Media. Why was that structure a mistake?

I don't call it a mistake. When we formed IPG Media, we were being slow followers. At the time, we thought that was what the marketplace needed. We had pulled Universal McCann out of the Worldgroup and we were forming IPG Media, and as we delved into it-and I give Mark Rosenthal a lot of credit for this-what became clear to us is that the clients were not looking for a separate IPG Media. They wanted to see our media offerings working closer with the networks.

Didn't you discuss it with your clients beforehand?
Well, yes, of course you discuss it with your clients, but they are not going to tell us how to run our business. And frankly, you run your business and you do what you have to do.

So they spoke up later with a different point of view?


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