Bruno Fagali has written an article in his blog that explains that three of Brazil’s largest corruption scandals involve advertising agencies. As a result of these three scandals and the publication of anti-corruption laws advertising agencies began to implement corporate integrity programs that would comply with the anti-corruption laws. In order for these programs not to be false, it is necessary for companies to carry out a thorough risk assessment. Bruno Fagali believes that during this assessment, a company can determine if there are any red flags. These red flags will determine if there is any unethical conduct or unethical business practices.
Fagali notes that not all red flags will indicate unethical practices, but some situations require stricter rules of conduct that should be monitored. Let look at the five red flags that are found in Brazilian advertising agencies.
- Intermediation of Payments by Advertisers
Communication agencies must not stop charging advertisers. Agencies may not divert payments owed to communication companies for advertising.
- Media Assignment Criteria
The advertising agency should explain to the company seeking advertisement which modes of communication are available for use. There is some risk of unethical behavior in this. In order to prevent this, the advertising agency should make a media plan and present it to the company seeking advertising.
- Incentive Plans
Known by other names incentive plans are so-called optional payments made by communication companies to advertising agencies that have a contract with them every six months or annually as an incentive to keep hiring them.
- Business Relationships
There should only be a strict business relationship between all parties. There should not be a friendly relationship of gift giving. It is unethical to exchange gifts, lodging, payments, and travel as perks to obtain contracts.
- External Services and Supply Fees
Extra embedded fees called production fees are a red flag.
Fagali notes that the people in charge of corporate integrity programs should make an in-depth analysis to find risks.