PentaMark Worldwide and its parent, BBDO Worldwide, won the contest to be the Chrysler group's sole ad agency. But the price was high: PentaMark had to give Chrysler two seats on its board.
The Chrysler group crossed the line in advertising agency-client relations by bullying PentaMark into providing the two seats.
Agencies worry about declining profit margins. Now independence is being undermined, and other agencies fear the board-seat trend will spread.
'The fact is, going any lower in cost than what we'd proposed would also have lowered our margins to levels that would have been unacceptable to us and to our shareholders,' said David Bell, CEO of the agency that lost the contest, FCB Worldwide.
Because BBDO is part of the financially strong Omnicom Group Inc., it could afford a lower price than True North Communications Inc. But it shouldn't have given up power, too.
The Chrysler group already has a clause in its contract with Omnicom that gives it final say on who PentaMark's executives will be.
Yes, the client pays the bills and exercises control, and that always will be a fact of life in such business arrangements.
'But the concept of an agency is to be unbiased, to provide outside counsel,' said an agency exec who asked to remain anonymous. 'Most agencies are part of publicly traded companies that have to run their business, too. The board seats minimize independence.'
Look at General Motors. One of its agencies, Campbell-Ewald Advertising, runs GM's media planning and buying units. GM has no seat on Campbell-Ewald's board, but those units balance serving the client and maintaining their independence.
Bud Liebler, vice president of global marketing for the Chrysler group, defends the seats: 'We'll understand better the agency's problems, and at the same time, they'll understand us better.'
Wrong. The board seats are an unhealthy intrusion into agency independence, which is not good for the agency or client.
Staff Reporter Julie Cantwell can be reached at jcantwell @crain.com or at (313) 446-0374