When former Mediacom chief executive Jon Mandel revealed a rampant practice of “kickbacks” in the advertising industry two years ago, media agency CEOs around the world ducked for cover.

Media agencies, that book advertising space for clients, were essentially being paid twice for the same pieces of work and, often, not disclosing it.

While advertisers are questioning the allegiances of their agencies, those same agencies may reply, “What do you expect when your cost cutting effectively reduces our fees and commissions to zero?”

Marketing management consultant, Darren Woolley, says it is time to consider the ethical impacts of a cost-cutting culture.

“I think it is interesting to see how ethics are quickly reframed or compromised, based on profit”, says Woolley, founder and CEO of TrinityP3 Marketing Management Consultants.

In the case of the media agencies, their duty to clients is to find the most effective advertising space for their clients at the best price.

However, things become complicated when the media owners of print, radio, television, and websites started handing back a proportion of the client’s media spending to the agencies as an incentive to get more of their business.

Those “rebates” were often not disclosed to the clients and were often not passed on. They could be from around 1.67 percent to 20 percent per cent of “aggregate media spending” and took various forms.

“Clients could not be sure that the advertising space purchased was the right strategy for them, or just the most lucrative for the media agency.”

An investigation commissioned by the Association of National Advertisers (ANA) in the US also revealed media agencies were buying heavily discounted media space and not passing on or disclosing those savings to their clients. The agencies’ mark up on these transactions ranged from 30 to 90 percent.

Mandel’s “truth bomb”, delivered at a conference in the US, and the ANA report confirmed suspicions that media agencies around the world may no longer be acting in the best interests of their clients.

Clients could not be sure that the advertising space purchased was the right strategy for them, or just the most lucrative for the media agency.

Were they being pushed into digital advertising, for example, because it offered more lucrative rebates? Were their advertisements being seen by the right people in the right places?

Woolley says instances such as these have eroded trust but are the result of a number of factors affecting agency profitability, including industry disruption, rampant discounting, and endless expectations of cost-cutting by clients.

“We have been in a world of cost-cutting for ten years at least”, says Woolley.

Media agencies are also under pressure from the large holding companies that are often their owners. The holding companies and their shareholders expect to see rising profits each year, irrespective of market conditions.

“The industry is struggling. The traditional remuneration models – the way money moves through the industry, has changed. Firstly, there is less of it and there is a constant demand to do more for less”, says Woolley

“The obsession with cost is at the very core of this issue about ethics and ethical behaviour.”

Woolley says clients should be aware their own cost-cutting has contributed to agencies trying to find new ways to get paid.

“It is interesting to see at which point they [agencies] are willing to do something they wouldn’t normally do, willing to act in a way that is not in the best interests of their clients, but is in the best interests of their own company.

“To me, that is the interesting tipping point. What does it take?”

Woolley says agencies are not out to do their clients harm, but the system is supporting harmful behaviour.

That system includes an expectation that everything should always get cheaper and profits should always increase. Clients over recent years have cut their fees and commissions to media agencies from about 10 percent to around 3 or 4 percent and less, he says.

Melbourne Business School Marketing professor, Mark Ritson, has written that it is possible some media agencies are now effectively working on zero commissions and their only remuneration is through kickbacks from media owners.

“Most experts estimate that if you were to properly assess the revenue streams funding any major media agency, rebate income would significantly, and perhaps in some cases completely, overshadow commission income”, Ritson wrote in a column in The Australian newspaper in October.

Woolley says that with fierce competition from digital media owners, kickbacks have grown dramatically. Traditional media owners (newspapers, radio, and television) used to budget 20-30 percent of revenue as sales incentives, discounts, bonuses, or rebates.

But the owners of websites and social media platforms, which do not have the labour and production costs of newspapers and broadcasters, can “rebate” up to 90 percent of revenue, says Woolley.

This means there is a clear incentive to steer client advertising to digital platforms, whether it is the most effective strategy or not.

Since the widespread practise was discovered, most large advertisers have closed the kickback loophole by drafting contracts that ensure savings are passed on and don’t only benefit the agency middlemen.

“Agencies should be rewarded for delivering value and performance, not just for reducing costs.”

Some have also mitigated the risk by dividing their advertising work between multiple agencies “to keep them honest”, says Woolley.

Getting the advertising and marketing industry back on a sustainable footing will take a lot more than encouraging clients to pay a fair price for their agencies’ work or allocating a reasonable budget towards effective advertising campaigns.

Marketing executives have told Woolley they cannot convince their own chief financial officers to pay their agency more – even when that lack of investment is resulting in ineffective campaigns.

“But it is not working as it is, so everything they are spending is a waste and an increase in spending could make it functional”, he says.

Woolley says the advertising and marketing industry needs to change the conversation if it wants to survive. “It has been about cost for the last 15 years. It is not easy, but the way forward is to actually talk about value”, he says.

“Cost is a downward spiral to zero.” Agencies should be rewarded for delivering value and performance, not just for reducing costs, he says.

“By considering an ethical approach, rather than just a financial or cost approach, it will open up possibilities for people to do and think differently because, certainly, we are in a spiral.”

It would be nice to think business is stamping out bad behaviour because it is the right thing to do. But that rarely is the case.

The growing pressure from regulators and the community mean employers have little choice but to clean up their acts, says Ian Silk, the CEO of Australia’s biggest industry superannuation fund.

He’s no stranger to a bit of pressure, adept at applying the “blowtorch” to hasten positive change. With $125 billion in assets, AustralianSuper was an activist shareholder in voting against the remuneration report of the Commonwealth Bank of Australia last year.

“The more controversial the issue, the more vociferous are the people who have strong views either way and, sometimes, you are in the middle of it and you have to make a judgement as to which way you will go.”

Previously, Silk had spoken out about the need for bonuses to be awarded for exceptional results, not just for performing the required tasks and, in the case of CBA, was arguing for more rigour around the bonus process.

The fund has also pledged to vote against the appointment of male non-executive directors where there are no women on the boards.

In an interview with The Ethics Centre, Silk says AustralianSuper’s high profile brings an obligation to speak out on “certain issues”.

“The more controversial the issue, the more vociferous are the people who have strong views either way and, sometimes, you are in the middle of it and you have to make a judgement as to which way you will go”, he says.

Ethics in business is a hot topic, particularly in the financial services sector.

“[It is], in a very large measure, a response to the egregious behaviour that is now so well publicised and readily-known by the public”, says Silk.

“Everybody knows unethical behaviour when they see it and I think there is a move back to appropriate norms. I think there is a recognition that much of the bad behaviour in the financial services sector is wrong.”

Silk says it is difficult to discern if this revitalised interest in ethics is deeply-felt, or whether it is a protective measure to avoid getting caught and penalised

“But I think there is a slow improvement in behaviour, much of it regulator and government led, but much of it community-led, consumer-led, some industry associations take a strong position on it.”

In terms of standards in his own organisation, Silk says he had been confident that the culture and behaviours at AustralianSuper would stand up to scrutiny. This is partly because, as a member-organisation, its sole purpose is to act in the interest of members and this provides a de facto ethical framework, he says.

However, earlier this year, he decided to get a second opinion. The Ethics Centre was engaged to undertake a “culture audit” to test whether the fund’s policies, procedures and practices were aligned with its purpose, values and principles.

“In my darkest moments, I just wondered if we had all drunk the Kool-Aid”, he says.

The results were gratifyingly positive and were affirmation that AustralianSuper and its 550 staff are on the right track, says Silk, who has led the fund since it was founded in 2006.

However, The Ethics Centre also found some areas for improvement, including a culture that could be “conflict averse”.

“We weren’t as robust as we might be. There was a tendency to avoid conflict in certain parts of the organisation, so we could introduce a bit more aggression into the organisation – aggression in a positive sense”, he says.

“People who are rude to others are counselled and abusive language or behaviour is not tolerated and could be regarded as a sacking offence.”

“Those areas where improvement opportunities were identified, we have consciously thought that we want to do something about that, we want to lift the standard in the organisation … so we have an action plan, we have done all the things that you might do with a business plan, we have identified all the particular areas, we have assigned responsibility to people, we are going to check in periodically to make sure progress has occurred.

“We haven’t just used it as a soft survey.”

It is too early to see much in terms of a change in culture since The Ethics Centre report was completed, but Silk says some progress has been noticed, such as more robust questioning in meetings.

“We are getting better outcomes as a result”, he says.

Silk’s commitment to respectful behaviours is well known. According to a recent report in the Australian Financial Review, every recruit to the organisation gets a one-and-a-half hour briefing from Silk on the fund’s four values.

People who are rude to others are counselled and abusive language or behaviour is not tolerated and could be regarded as a sacking offence.

The Ethics Alliance sat down for a further conversation with Ian. He shared his insights on the importance of discussing ethics with your network, why organisations always need to work toward good ends, and why leaders can’t just talk the talk. They need to walk the walk.

After almost thirty years of existence, The Ethics Centre has chosen this particular time to establish The Ethics Alliance. Why the Alliance, and why now?

I’ve heard it suggested that the Alliance is a necessary response to a period of history in which our trust in institutions – including banks, governments and the media – has dropped to a new low point. Some may see it as an opportunity for organisations to restore their battered reputations.

Others may see the Alliance a little more generously, as a community of like-minded organisations with a common commitment to good business practice. A collaborative effort to raise the standards of good business behaviour. A source of insights and tools that will enable better culture to emerge.

While low levels of trust certainly form part of the context within which The Ethics Alliance is emerging, we believe the root cause of our current malaise is something far more significant: the fact that we are on the edge of a transformation that will change our society in ways every bit as profound as those caused by the First Industrial Revolution.

The Ethics Alliance has a clear function. It is a mechanism for developing collective insight and practical measures that will support its members to manage this historic transition. The Alliance will enable companies – and the leaders who work in them – to harness change for the benefit of employees, customers and shareholders alike. The ultimate beneficiary will be the society in which we all live.

We are already seeing clues as to the general shape of the coming changes. Many of these are the product of scientific and technological innovation. Artificial Intelligence and robotics (including nano-fabrication by 3D printers) will displace vast numbers of people from employment. New jobs may be created – but there are very few credible plans in place to ensure the necessary transition will be just or orderly.

The upheaval in employment will be accompanied by a revolution in medicine. Gene editing (using the ‘cut & paste’ functions of CRISPR), pharmaco-genomics, the use of stem cells to regenerate organs and a myriad of other developments will see a startling increase in the lifespan of those who can afford these therapies.

The resulting seismic shift in demography will challenge all of our assumptions about what makes for a worthwhile life, about the status of long-established social institutions, about sources of value and so on. What kind of economy will be needed to support such a society? What is the role of the market, of government, of civil society?

These questions will create new practical challenges within every workplace. If one of the key responsibilities of business leaders is to anticipate and plan for the emerging future and creating organisations which are fit for purpose, then there is much to discuss. Scientists, economists, engineers and lawyers can help us to know what we could do in response to issues of this kind. But only ethics can help us decide what we should do.

We believe business, professional and government organisations not only have a responsibility to help meet the challenges of the future – they also have the capacity to do so.

These matters are not just for governments to solve. Few, if any, organisations will be able to address such ‘civilisational’ challenges alone. Aggregating the resources, energy and insights of members of The Ethics Alliance will achieve outcomes that individual organisations could never achieve on their own.

The Ethics Alliance will also provide practical tools to its members – building their capacity to make better decisions – even in conditions of uncertainty. And it will support innovation. The Ethics Alliance has been designed as a safe place for testing the boundaries of what might be possible.

Society may have lost a little of its faith in government and business lately, and that’s something we should all be concerned about. We believe business, professional and government organisations not only have a responsibility to help meet the challenges of the future – they also have the capacity to do so.

These same organisations cannot afford to ignore these issues or mismanage their response. This is not just about managing risk. It is also about learning how to harvest the dividends of progress without compromising the future.

In that sense, The Ethics Alliance is not so much a response, as a product of the times in which we live.

To some men, the presence of a woman at work seems like an unexploded grenade, ticking away, just waiting to blow up their careers.

The Deputy US President, Mike Pence, famously refuses to eat alone with a woman who is not his wife for fear he may be “compromised”. His inspiration in this, the recently “departed” evangelist Billy Graham, even reportedly refused to be alone in a lift with one.

Since the tidal wave of #MeToo sexual harassment claims surged around the world’s workplaces over the past few months, there has been a backlash of complaints on mainstream and social media that men are now afraid that an act – that once seemed innocuous to them – would now return to destroy them.

Outside a function to raise support for Movember – a men’s health foundation – former INXS guitarist Kirk Pengilly vocalised the angst with this reply to a question about the sexual harassment allegations that fell movie producer Harvey Weinstein and gardening TV star Don Burke:

“I really loved the ’60s and ’70s when life was so simple and you could slap a woman on the butt and it was taken as a compliment, not as sexual harassment.”

Diversity initiatives have also attracted their share of pushback. Google recently fired an engineer who wrote a 10 page memo against the company’s affirmative action programs. The engineer has now filed a lawsuit alleging discrimination against white people, men and political conservatives.

The engineer claimed women are underrepresented in the tech industry “largely because of their innate biological differences from men – their ‘stronger interest in people rather than things’, their propensity for ‘neuroticism’, their higher levels of anxiety”.

How nervous are they?

Does this backlash indicate that men are becoming afraid of women, as some media reports claim? That women now have too much power and an inclination to take men’s jobs? Just how nervous are they?

One of Australia’s foremost experts on men and masculinity, Dr Michael Flood, says speculation about men’s growing trepidation around women has been overstated.

“For many men, the primary reaction has been one of disinterest. They don’t see the these as issues of direct concern to them”, says Flood, a sociologist and associate professor at the Queensland University of Technology School of Justice.

Flood’s research shows that men are widely supportive of gender equality initiatives, however, they are also less likely than women to recognise discrimination when it occurs.

Fewer than one third of women in Australia think men and women are treated equally at work, compared with 50 percent of men who said the same, according to the Australian Women’s Working Futures 2017 report from the University of Sydney.

Belief of false accusations

Despite the overwhelming support for the idea of equality, some men find the new workplace gender politics threatening.

“I think [#MeToo] is going to push some men’s buttons. I think there is a widespread perception, a false perception, that women make up allegations of sexual harassment and that draws on a very old stereotype of the lying, vindictive woman – a very long standing sexist stereotype”, Flood says.

“And so that belief that false accusations of domestic violence and sexual assault are common, then plays itself out in fears about men being falsely accused of sexual harassment.”

False reporting of rape and sexual assault are between two percent and six percent in the UK, Europe, and the US.

US sociologist and masculinity researcher Dr Michael Kimmel, says Mike Pence’s solution makes him the “American equivalent of the Taliban”.

The logic is that women are so tempting and that men are so incapable of control, they cannot be trusted to interact in the workplace, says Kimmel, Distinguished Professor of Sociology at the Stony Brook University in New York and author of Angry White Men: American Masculinity at the End of an Era.

“This is a way of punishing women for men’s predatory behaviour. It is just evangelical Talibanism.”

Punishing women for men’s behaviour

Kimmel says he has heard men in companies claim that the situation is so perilous they will not hire a woman, go to a meeting with a woman, have a meal or a drink with a woman in case they are accused of sexual harassment.

“My analogy to this is the crazy straight guys who are afraid that every gay guy is going to hit on them. It is not going to happen. You are just not that interesting”, he says.

Kimmel says he also hears from men that they do not know what to do, are worried about saying the wrong thing or feel like they are “walking on eggshells” in their interactions with women.

“I regard this as relatively good news because what most men are saying is, ‘I don’t want to be a jerk. I don’t know what the right thing to do is anymore, but I don’t want to do the wrong one’.”

“That is a good start.”

Flood agrees, saying he welcomes the fact that many men are asking themselves some difficult questions about how they treat women.

“I think that is probably, in some, leading to more respectful, more equitable and more enjoyable relations among women and men in workplaces.”

Kimmel takes some comfort from research that shows younger men are savvier about what is acceptable behaviour around women in the workplace.

“The rules have changed. The old Don Draper [1950s Mad Men] rules no longer apply and many of us, who are aged 60 and above, were raised on those Don Draper rules and so we kind of don’t know what to do now.

“Age is a missing variable in the conversation and it needs to be discussed.”

However, this is not to say that older men cannot adapt. “I think we don’t give men enough credit sometimes. Most of us have adapted [to the new rules] just fine. Why? Because we actually like it. It is better.”

Flood cautions that it is important not to dismiss the trepidation of those who do feel threatened.

“We need to listen to men’s fear and work with it, but that doesn’t mean we give it a space or legitimacy that it doesn’t deserve”, he says.

If those fears are not dealt with, those men tend to “dig themselves in to resistance and defensiveness”.

Kimmel says we are now in a transitional period where neither men or women are comfortable in the workplace.

“The reason I am so sanguine about this is because I know young people. Young people are coming into the workplace and they already know the rules have changed.

“The Millennials are far more equal when they come in, they are far more capable of working in teams, they have far more cross-sex friendships. Yes, it is going to be discomforting – we all understand that ­– but I also think it is going to be fine.”