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#St Luke s founder resigns

The founder of St Luke's, the mould-breaking advertising agency, has resigned after criticising the company for becoming too conservative under new management.

Andy Law, who has won plaudits for his innovative approach to business, said he had gone as far as he could with the agency. He will leave St Luke's immediately, along with deputy chairman and co-founder Kate Stanners, after a dispute over strategy developed into a bitter boardroom battle.

St Luke's was at its most successful when it was at its most radical, and the challenge is to keep that innovative streak going, he said.

It's got all the component parts for success but it is a case of whether it retreats from innovation or pursues it. Essentially, the piggy bank has now been depleted and in the meantime there were lots of missed opportunities to exploit the brand.

St Luke's was one of the industry's brightest stars in the 1990s, attracting major-league clients such as BT, the government and BSkyB, despite its highly unconventional business approach. But it has been hit hard by the advertising recession. In the past 18 months the agency has suffered a series of client losses including its flagship account, Ikea, for which it created the memorable chuck out your chintz campaign in the late-1990s.

Its torrid experience at the hands of the advertising recession was underlined by a drop in billings, or the amount of money spent by clients on advertising, from 90m in 2000 to 43m last year. Income has fallen from 10.2m in 2001 to 9.2m last year, although staff numbers are unchanged at 110.

Joint managing directors Phil Teer and Neil Henderson, who were promoted after co-founder David Abraham defected to Discovery Networks in 2001, are understood to have resisted Mr Law's ambitious expansion plans for the agency for financial reasons.

Mr Henderson said he had enjoyed working with Mr Law and now wanted to focus on the future of the business.

Andy had a lot of personal ambitions he wanted to fulfil. This kind of thing happens a lot at St Luke's. People become interested in different things and they move on, he said.

We are actively pitching for business and our existing clients, which include BT and COI Communications [the government's advertising service], have all increased their spending.

Mr Law founded St Luke's with Mr Abraham in 1995 as a co-operative, with every member of staff given a share in the business and a say in how it was managed. The company was praised for its innovative approach, becoming one of the first agencies to introduce hot-desking, where employees have no fixed workspace in the office, and allowing staff time to pursue other interests such as film-making and music as part of their working lives.

But despite its progressive image, the agency had its share of internal politics. A fly-on-the-wall documentary broadcast on Channel 4 exposed the difficulties of an entirely democratic approach to running a business, as staff rowed about the ethics of sending each other flowers to reward hard work.

Mr Law said he wanted to stay in the advertising business and could set up his own agency in the near future.