WPP’s decision to take on an external security company — believed to be the same risk management company involved in its Thai investigation, Control Risk Group — to monitor underhanded dealings in the mainland could have wide implications for the industry as well as the media agencies operating under the GroupM banner.
As they say, there’s no smoke without fire and WPP must indeed have been caught in a dilemma: in an era of Sarbanes Oxley, China’s business culture — centred on guanxi or connections — makes something of a mockery of the holding company’s global stand on integrity and transparency.
A crackdown that sets out to unearth problems and threatens to hold even the most senior media executives liable is an aggressive play and could open up a can of worms. It is, however, an important recognition of a problem that many have, so far, chosen to ignore.
Indeed, multinational agency sources Media spoke to on condition of anonymity acknowledged that their media buyers routinely take kickbacks — often in the form of extravagant entertainment and travel expenses. Many agency chiefs, who once held idealistic notions believing that their presence in the market may compel Chinese executives to adopt more ethical business practices, have found that in reality the dynamic works in reverse, with foreign executives adopting Chinese-style tactics to secure business.
Managing the issue, most agencies have in place a Rmb500 (US$64) ceiling of ‘gifts’ that are officially considered acceptable and, in some cases, part of the salary package. Anything above that, in theory, is handled as a rebate that lands in a communal fund inside the agency, presumably to avoid making individuals vulnerable to corruption charges.
But the lure of profit combined with pervasive local corruption is tempting and, over the years, media agencies in China have spawned more than their share of self-made millionaires, with some senior executives retiring from agency life in their 40s.
That’s not to suggest however that kickbacks are confined to the media scene, or even China.
Dubious dealings are seen in different guises across industries and markets. In the PR industry, for instance, it’s not uncommon for public relations agencies to pay reporters on a per-word basis to run positive stories about clients. Journalists, meanwhile, are heard of paying kickbacks to the media relations executives in agencies a percentage of those fees.
With the Chinese Government trying to contain its corruption problem, albeit with mixed results, it’s only a matter of time before the crackdown filters through to the private sector.
It takes a brave organisation with committed leadership to resist the temptation to take short cuts, particularly when it’s operating in an environment where not only is corruption pervasive, but where it appears to be a critical part of doing business.
WPP has fired off the warning shot. The question now is how its rivals will respond to an issue many undoubtedly feel is best left ignored.
While print publishers globally are struggling with declining sales and shrinking budgets, India’s newspaper industry, it would appear, continues to boom in one of the most crowded markets in the world.
Indeed, in a market where print accounts for 48 per cent of adspend with a 23 per cent growth rate, the prospects for India’s newest business read Mint seem bright.
Whether Mint can leap ahead of no fewer than 10 rivals to take second place to market leader Economic Times remains to be seen. But its compact size and link with the Wall Street Journal may just give it the advantage it needs.
