Appearances Matter

I made myself a note to write about a common business situation that can cause a lot of grief if not handled in a smart manner.  Unfortunately, what prompted the note was a situation which was not handled the right way.  I’m talking about conflict of interest and how appearances really do matter.Dunce_cap_from_LOC_3c04163u

When I was in my corporate jobs from time to time I was offered “insider” pricing on some pending IPO‘s.  I was also invited to serve on advisory boards.  These offers came from start-up companies that were looking to do business with my employer and I was under no delusion that the offers were being extended because of my wit and charm or youthful good looks.  I hesitate to use the word “bribe” but I understood that it was possible someone looking at this might think that my loyalty might be by divided – business interest vs. self-interest.

What raises this is a report on a major ad agency CEO being granted stock options in a company that is a vendor to her agency.  These options might be worth as much at $3,000,000 if a planned IPO goes through.  Digiday makes the exact point:

In its S-1 filing, Tremor says any conflicts of interest related to Desmond are and will continue to be avoided because she’s “recused herself from all negotiations” with the company. While it’s unlikely Desmond regularly writes media plans for SMG’s clients, the fact remains she oversees a business that spends millions of dollars with a company she has a financial interest in.

I know from personal experience that even when your boss tells you to ignore his relationships with a vendor it’s hard when you know there’s a friendship or familial relationship.  When those relationships are more than personal friendships and extend into financial dealings, it’s impossible.

Appearances matter.  In this age, one can assume any relationship will come out and be widely known.  Any competitive vendor losing some of the agency’s business will have grounds to cry foul.  Tremor (the vendor involved) will have grounds to scream if the CEO (and now board member) doesn’t live up to her fiduciary responsibilities  It’s a bad, easily avoidable situation for everyone.  Hopefully you’re smarter than this.  Right?

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Filed under Helpful Hints, Reality checks

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