Lecture

The Principal-Agent Problem - An Advertising Perspective

Abstract

In an ideal world, each agent works on his client’s (principal’s) behalf and follows the mandate agreed on. Consequently, he receives remuneration for the mandate. However, agents are sometimes tempted to abuse the mandate and act in their own best interests and maximize their benefits. This talk aims to discuss the so called “principal-agent problem” focusing on the advertising perspective of it. Moreover, it will cover the implied client controls, improved methods of escaping their scrutiny as well as the tougher audit approaches. Within Media and Production, agents are very often paid on a commission basis. Hence, their incentive is then is to push their clients to spend as much as possible. Even in a situation where the budget is tight, a similar situation arises. Agents are motivated to negotiate with the suppliers and ask for a retro-commission. If a client happens to reveal such a practice, he naturally claims his money back. The second part of the talk will be dedicated to an open and transparent advertising and media agency model developed for the 21st century. What would happen if instead of working with an agency, one could operate in an open environment? What are this model’s prerequisites?

Bio

Remi Diligent has close to 20 years experience in the media and advertising service industry, being CFO at Lion Communications, for Publicis, Saatchi & Saatchi and Leo Burnett in the Czech republic, at Euro-RSCG Middle East and MPG Middle East, at DDB Prague (a branch of Omnicom group), Ogilvy group Czech republic.