Boards haunted by the ghost of Lehman, says Sir Martin Sorrell

The boards of major companies are haunted by the ghost of Lehman Brothers and are still behaving too cautiously more than five years later, according to Sir Martin Sorrell.

The WPP chief executive said yesterday there remained too much focus on cutting costs and not enough boards were investing for the long term.

He said: “We’ve never recovered from Lehman and 2008. Don’t underestimate the significance of that weekend on corporate thinking.

“Corporates have become terribly conservative. They’re sitting on $4.2 trillion in cash and relatively unleveraged balance sheets.

“People say there is a lot of M&A activity but I question that. I wonder how much of it is real and how much of it is people noodling and thinking about things.”

Sir Martin made his comments to an audience of senior technology, media and telecoms executives in London. Analysts predicted 2014 would see major M&A actvity in the sector but so far a rumoured AT&T bid for Vodafone has been officially put on old for at least six month and plans to float the mobile operator EE, in what would have been the biggest IPO of the year, have been scrapped.

Sir Martin said accountants had become much more influential within companies since 2008, noting that half of FTSE 100 chief executives are former chief financial officers.

He said: “The power of finance and procurement is too strong. I’m obviously biased... but the power has shifted and we see marketing have less and less power.

“The only way in the long run for companies to survive and prosper is by growing top line rather than focusing on costs exclusively. I think we’ll see that shifting back as people see its short-term nature.”