“Extended terms often come with consequences, including strained relationships with vendors, reduction in flexibility, and higher prices. …the business models and livelihoods of smaller players in the
marketing supply chain can be threatened by extended terms. Such companies are not banks.”
- Association of National Advertisers’ Payment Terms report, March 2020
Pick up any company’s annual report and there will be a section on how important it is to be socially responsible. Companies know that both their customers and employees expect them to do the right
thing. For people. For the planet. According to the March 2020 Edelman Trust Barometer Survey, 90% of people said companies and brands need to protect the financial well-being of employees and suppliers.
They know that if they don’t, it won’t just be bad for PR. It will be bad for sales. It will be hard to hire and retain talent as well as customers.
Today, Fortune Global 500 firms spend around $20 billion a year on CSR activities.
Research has shown that various forms of prosocial incentives (workers get rewarded not with money, but with the firm engaging in some act to benefit society) indeed increase productivity in simple and
complex tasks, increase retention, and even lower employees’ wage demands.
With the World trying to come to terms with the COVID-19 pandemic one would expect this to be even more true than ever before.
And yet we are hearing from our members all around the World that many of those same “corporately responsible” companies are using the crisis to delay paying their agencies. Late payment is a pernicious
habit that even cash rich companies employ to falsely enhance their liquidity ratios.
It is directly at odds with their avowed policy of CSR. Agencies are de facto being asked to act as Banks for bigger Client companies. These companies bully agencies into longer payment terms or just
flagrantly flout contractual payment terms. The unintended consequences mean agencies in-turn struggle to meet payroll, often 75% of their costs. Then have to delay paying their freelancers and subcontractors (who have been hired to work directly for these clients). These are often niche and diverse community-based media owners as well as voice over artists, photographers, illustrators etc. Their fees are their salaries. It’s what pays the rent and what puts food on the table.
Research shows that if employees think their company is using CSR initiatives instrumentally — trying to engage in prosocial activities only to benefit from it — then they’ll react negatively and put in less effort.
In other words, while these initiatives will benefit society, they will backfire for companies if people think they’re being used for the wrong reasons. "It cannot be in clients’ long-term interest, when reputation is so critical to ensuring you can work with the best possible talent, to unfairly extend payment terms."
- Stephan Loerke, CEO, World Federation of Advertisers, May 2020
"I’ll be perfectly blunt: I think there are situations which are unfair and cross the line, and I am not a proponent of continuing to extend terms. There are some situations which have broached into unfair
territory and there needs to be a reckoning between clients and agencies to what is reasonable and sustainable over the long term and stick with that."
- Bob Liodice, CEO, Association of National Advertisers Campaign, May 2020
The below named agency associations around the world have come together to call on members’ clients to seek agreement on payment terms that support a positive and mutually beneficial relationship.
Together we can support the sector and those that rely on our industry for their livelihood.
• Alianza por el Valor Estratégico de las Marcas (AVE) – Mexico
o Contact Sergio López – sergio.lopez@ave.mx / +52 2623-0560
• Association of Accredited Advertising Agencies of Hong Kong (HK4As) – Hong Kong
o Contact Onie Chu – onie.chu@aaaa.com.hk / +852 2882-8161
• Association of Accredited Advertising Agents (4As) – Malaysia
o Contact Khairudin Rahim – khairudin@aaaa.org.my / +60 (3) 7660-8535
• Association of American Advertising Agencies (4A’s) – United States of America
o Contact Marla Kaplowitz – Mkaplowitz@4As.org / +1 (212) 850-0702
• Brazilian Association of Advertising Agencies (ABAP) – Brazil
o Contact Alexandre Gibotti – presidencia.nacional@abap.com.br / +55 (11) 3074-2162
• Commercial Communications Council – New Zealand
o Contact Paul Head – paul@commscouncil.nz / +64 (21) 574-062
• The Communications Council – Australia
o Contact Tony Hale – tony@communicationscouncil.org.au / +61 411 153-447
• European Association of Communication Agencies (EACA) – Europe
o Contact Tamara Daltroff – tamara.daltroff@eaca.eu / +32 (2) 740-0715
• Institute of Communication Agencies (ICA) – Canada
o Contact Scott Knox – scott@theica.ca / +1 (437) 350-1436
• Institute of Practitioners in Advertising (IPA) – United Kingdom
o Contact Paul Bainsfair – paul@ipa.co.uk / +44 (776) 833-3666
• Unión Colombiana de Empresas Publicitarias (UCEP) – Colombia
o Contact Ximena Tapias Delporte xitapias@cable.net.co / +57 31023-65325
