There was evidence of non‐transparent practices across a wide range of media, including digital, print, out‐of‐home, and television.18
The ANA had commissioned the study because of a number of back‐and‐forth allegations in 2015 between major advertisers and large agency holding companies that the agencies’ ad buying, especially with growing use of programmatic trading, had not been transparent, which had inflated the profit margins of the agencies at the expense of major advertisers who should have received credit for discounts and rebates that instead went to the agencies.
When the report was released, the Association of American Advertising Agencies (4A’s) posted this response:
The ANA today released a K2 report on media buying practices. Although the 4A’s has worked collaboratively with the ANA via a joint task force, this report is anonymous, one‐sided and paints the entire industry with the same negative brush. This statement further elaborates the 4A’s position on this issue.
A healthy and constructive debate about media buying can only happen with a bipartisan, engaged, industry‐wide approach – and that is precisely the opposite of what the ANA has pursued. The immense shortcomings of the K2 report released today – anonymous, inconclusive, and one‐sided – undercut the integrity of its findings.
We call upon the ANA in the strongest terms to make available to specific agencies on a confidential basis all of the materials related to them. Without an opportunity for agencies to assess and address the veracity of information provided to K2, sweeping allegations will continue to drive attention‐grabbing headlines; this does nothing to foster a productive conversation or to move our industry forward.
Faced with a report that views media buying from the perspective of only one of the three parties to such transactions, agencies are hard‐pressed to defend themselves, which could cause substantial economic damage to all media agencies.
The advertising ecosystem is increasingly complex, and we are firmly committed to ensuring appropriate governance practices are in place. In an effort to address today’s challenges and modernize industry practices, the 4A’s worked productively for six months with ANA last year. Our joint task force developed principles of conduct to establish clear standards for transparency in media buying. When the involvement of third parties in tackling this challenge was suggested by ANA, the 4A’s was supportive, even offering to be a partner in the RFP process. The entire industry is harmed and at risk of further damage as a result of the path the ANA has chosen.
With or without ANA’s collaboration, the 4A’s is committed to taking a leadership role in achieving fairness and transparency in the marketplace for all parties to media buys. Despite the fact that our paths have diverged, the 4A’s is determined to build upon the significant groundwork laid by the joint task force, including a number of agreed‐upon principles, which we released in January of this year and which can be found here (link to https://www.aaaa.org/4as‐issues‐transparency‐guiding‐principles‐of‐conduct/).19
I will let the reader make a judgment as to which side’s argument is the most credible. However, to those knowledgeable about the issue, there is little doubt that at many major advertising agencies there had been a lack of transparency that had inflated the agency profits without their clients knowing about what was going on.
As a result of this dispute over transparency in media buying, in which the media was often complicit in order to kowtow to large agencies, many advertisers put in place highly specific contracts with their agencies that required transparency.
This conflict clearly demonstrates what happens when trust between two businesses or industries vanishes – handshakes are replaced by restrictive and complex contracts. The only people who benefit from such contracts are the lawyers who draw up the contractual agreements. It would have been much better for the marketing ecosystem (marketers, advertisers, agencies, and the media) if everyone had conducted an ethics check whenever they did business.
If there had been an ethics check, everyone’s reputation would not have been tarnished and everyone would have made more money in the long run, as clearly pointed out in Fred Kiel’s research detailed in his 2015 book, Return on Character. The research by KRW International found that CEOs whose employees gave them high marks for character (honesty, integrity, responsibility, forgiveness, and compassion) had an average return on assets (ROA) over the two‐year period studied of 9.35 percent, which was almost five times as much as that of those companies with CEOs who had low character ratings; their ROA averaged only 1.93 percent.
The result of the research can be summarized as showing that character and doing the right thing is more profitable in the long run. Good ethics are good business.
Test Yourself
1 What are the five rationalizations some people use for their unethical behavior?
2 What are the four reasons why people are inclined to behave unethically?
3 What are the Five Cs of ethical responsibility for media salespeople?
4 What are the Don’ts for media salespeople?
5 What are the Dos for media salespeople?
6 What are the three rules of the Ethics Checklist?
7 Explain transparency.
Projects
Project #1: Go to the Web and search the websites of several major media companies and see if you can find any statements about ethical behavior, standards of conduct, corporate citizenship, or corporate responsibility. Then, go to the websites of major advertisers such as ATT, P&G, Ford, Google, Apple, or Amazon, and see if they have any statements about ethical behavior, standards of conduct, corporate citizenship, or corporate responsibility. What did you discover?
Project #2: Go to the Downloads section of the Media Selling website (www.mediaselling.us) and download “A Salesperson’s Dilemma.” Read the case carefully and then complete the assignment at the bottom of the case.
References
1 Blanchard, Kenneth and Peale, Norman V. 1988. The Power of Ethical Management. New York: William Morrow.
2 Davis, Keith, Frederick, William C., and Blostrom, Robert L. 1980. Business and Society: Concepts and Policy Issue. New York: McGraw‐Hill.
3 Gardner, Howard, Csikszentmihalyi, Mihaly, and Damron, William. 2001. Good Work: When Excellence and Ethics Meet. New York: Basic Books.
4 Kiel, Fred. 2015. Return on Character. Boston, MA: Harvard Business Review Press.
5 Seidman, Dov. 2007. How: Why How We Do Anything Means Everything…in Business (and in Life). Hoboken, NJ: Wiley.
Resources
1 Dov Seidman’s LRN corporate website (www.lrn.com/index.php)
2 Securities and Exchange Commission Public Company filing (www.sec.gov/edgar.shtml)
3 Association of National Advertisers (www.ana.net/content/show/id/industry‐initiative‐media‐transparency‐report)
4 Association