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I had this issue for the headers and found I needed all this to get it to also fix it in IE. Note this is for the headers, not cells. The problem with this is it probably effects more than you might want(as I'm sure I'll discover later) but you can always refine the css selectors and/or make them reference the specific #tableIdName or some class so that you can opt-in as you please.
.ui-jqgrid .ui-jqgrid-htable th div {
overflow: visible !important;
height: auto !important;
}
.ui-th-column, .ui-jqgrid .ui-jqgrid-htable th.ui-th-column {
white-space: normal !important;
}
.ui-jqgrid .ui-th-div-ie{
white-space: normal !important;
}