THE ADVERTISING world was rocked last night after Lord Saatchi stepped down as executive director of the agency he founded, a week after the firm's shares imploded on the back of a major profit warning.

Fellow Conservative grandee Lord Dobbs, Prince Charles' former private secretary Sir Michael Peat and wellknown City figure Lorna Tilbian also resigned from the board in a bombshell statement released last night. City A.M. understands the decision was taken as a result of a number of disagreements between members of the eight-person board.

It is believed that chief executive David Kerslake had offered to resign, but was told that this was not in the company's interest.

Last week the legendary Golden Square firm admitted a two-year £11.6m accounting error after PwC conducted an independent review. That error, along with a profit warning, sent shares at the company tumbling.

M&C Saatchi's share price fell to 79p last Wednesday, nearly halving the firm's market capitalisation. The embattled firm has now lost nearly three quarters of its value since March, when its shares were trading at 400p.

It was later revealed that chairman Jeremy Sinclair, Kershaw and executive director Bill Muirhead had bought £1m in shares on the same day, in a show of support for the firm. Those three directors — along with M&C Saatchi's finance director — are now the sole members of the board.

A search for new executive directors will occur at pace, City A.M. was told.

The firm has announced it will restructure its board, along with its financial function, in response to what has been a torrid time for one of the mainstays of ad land.

In a statement last night, Sinclair said: "We have accepted the decision of these directors to resign.

"We are determined to restore the operational performance and profitability of the business, and are already implementing all of the recommendations set out in the PwC report we announced last week.

"We had started a process to reconstruct our board with new independent directors. This new board will have a mandate to conduct a full review of all aspects of our governance."

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