For many corporate affairs executives in the media industry, the recent release of a report exposing non-transparent media rebates, credits and value banks has caused a major shakeup throughout the industry. Although focused on the US, the study is almost certain to have world-wide ramifications for the reputation of media companies. Ultimately, this report will force not just executives in such companies, but marketers and agencies in Australia and the rest of the world to learn important lessens about operating in the new media environment.
After an internal appraisal at Mediacom in Australia last in 2015, chairman of the parent company GroupM Jon Steedman announced that the company had, in fact, exploited the legal and ethical loopholes by operating value banks in Australia. His admission largely sums up what the dilemma now permeating throughout the industry is.
"It's not illegal," said Mr Steedman, "[but] it is against our ethics as a business."
New report raises the profile of unethical practices
The report commissioned by the Association of National Advertisers (ANA) and prepared independently by K2 Intelligence actively avoids pointing any fingers, but rather seeks to act as a wake up call for those not being entirely straight about their practices.
President and CEO of the ANA Bob Liodice explained how the fact that some agencies are not abiding by the ethical principals of full disclosure when managing their agency-advertiser relationships must be addressed at an industry level.
"Whether acting as agency or principal, vast changes in technology, the complex digital supply chain, and the proliferation of media outlets provided agencies with additional opportunities to increase their profit margins beyond agency fees," he said. "This has led to disconcerting conflicts of interest and a lack of transparency."
Industry leaders quick to push back
Many within the industry have been quick to dismiss the report's validity. For one, Mauric Levy, CEO of French multinational advertising and PR company Publicis, called the investigation "an unwarranted attack on the entire industry", as reported Wall Street Journal.
"The broad unsubstantiated and unverifiable assertions of unethical behaviour against some or all advertising agencies," Mr Levy said, "[have the] potential to cause great financial and reputational damage."
However, Chairman of the ANA Tony Pace suggested that this report only increases the profile of such practices, and therefore will enhance the legitimacy and legality of the global industry in such turbulent times.
"As media practises have become more complex, stewardship and oversight needs to become more precise, more thorough, and more fully transparent," he said.
Ultimately, in order to manage reputational risk, a clear moral compass and ethical agenda is needed as the laws catch up.