Where are the checks and balances? A few weeks ago when PC maker Acer hired Red Peak Group to overhaul the Taiwanese company’s global marketing efforts, it also appointed a Red Peak founder, Michael Birkin, as CMO. What makes this move highly unusual is that Birkin will retain a formal role at Red Peak as its chairman—a duality of roles that raises conflict-of-interest questions about compensation, creative and operational issues affecting the marketer in its relationship with the ad agency.
A rep for Red Peak declined to make Birkin available for comment.
It’s not the first time a client-side executive has had ties to, or a financial interest in, the agency working on its business. Last March, Interpublic sold William Morris Endeavor to an entity fronted by Mark Dowley, the agency’s former CEO, who a month earlier joined WME client Under Armour in a top marketing post. A month later, Under Armour shifted Dowley into an “advisory” role. Dowley, who did not return calls, is no longer with the company, nor is the account at WME.
In another instance, Jim Holbrook, a Post Foods marketer, joined the company last October, after serving as CEO at EMAK, the parent of Chicago agency Upshot. Shortly after Holbrook went to Post, Upshot landed assignments for Post’s largest brand, Honey Bunches of Oats, and for Grape Nuts. EMAK no longer exists; Holbrook sits on Upshot’s board although it’s unclear if he has a financial stake. Upshot CEO Brian Kristofek said the agency is treated like any other Post shop and does not receive preferential treatment or payment.
Some observers doubt marketers can remain objective in such situations. “There is an inherent conflict of interest and an appearance of impropriety that is as bad as if it actually exists,” said one agency consultant. Others argue these arrangements, if made public, can be dealt with to avoid such problems.
“As long as there is transparency, it shouldn’t be a conflict,” said Rick Kurnit, a law partner at Frankfurt Kurnit Klein & Selz, N.Y. In negotiating compensation, for instance, another executive at the client or in procurement could handle those details, he said.
In the case of Birkin, Kurnit wonders if prospective Red Peak clients would be put off knowing the agency’s chief strategist is now working as a global marketer for a company in a time zone that’s 12 hours ahead of New York.
Which raises the question: Why bring an advertising exec in-house if a marketer gets that talent through hiring his agency?
Ron Urbach, chairman of N.Y. law firm Davis & Gilbert, said there could be value in having that individual’s internal influence in achieving business objectives as well as in external marketing communications. Coupling that marketer responsibility with executional insights could lead to better-coordinated results, he added.