Sour Economy Prompts Analysis of Channel Ethics, Breaches

The deplorable economy, combined with an absence of enforceable accountability, is spotlighting a glaring truth: the channel needs to evaluate and address its ethics practices — or lack thereof.

Sources say the final general session — “Channel Ethics 101” — at the Spring 2009 Channel Partners Conference & Expo comes none too soon. As the global financial situation continues to contract, people are growing more fearful for their livelihoods. That’s translating into a “dog-eat-dog” mentality, causing some agents to stretch their values to secure business, said panelists.

“Everyone goes into survival mode and becomes very protective and territorial,” said Dany Bouchedid, CEO of master agency COLOTRAQ and president of the recently established Technology Channel Association, or TCA.

Michael McLelan, senior vice president of business markets for PowerNet Global Communications, made a similar point, noting that service providers, not just indirect partners, can defy ethics.

“In times of great stress and economic pressure, many companies are tempted to cut corners and fudge on their ethical commitments,” he said.

Fear — real or perceived — has businesses cutting back on spending, McLelan said. In many cases, that’s leading to reduced commissions or stopped payment altogether.

“The agent needs to know the core values of the companies with which they do business,” said McLelan. “Are they honorable and trustworthy? Our discussion needs to call on our colleagues and partners to hold fast to high standards so they too can become known as a trustworthy partner.”

Yet, economic madness doesn’t always account for ethics troubles within the channel. Sometimes, it’s just the ugly part of human nature. Agents targeting unsophisticated clients, representing a certain technology as the answer to all their woes? Greed. Swooping in at the last minute to snatch away a contract? Avarice.

“At the heart of all the problems is the complete absence of any real organizing and governing body that can help establish proper rules of engagement; protocols for managing disputes; standards of conduct; and best practices on an industry-wide level,” said Bouchedid.

The TCA might be able to serve as that body — to be sure, someone has to blaze the trail — but it will be a while before that’s the case. Its initial tasks include developing those best practices, and devising training and accreditation programs for indirect salespeople.

Other panelists agreed that a licensing or industry association would be among the best ways to address ethics problems. But any such entity has to carry clout or there’s otherwise no point to the endeavor.

“Without power to enforce with repercussions, any certifications they might pass out would likely be meaningless,” said Josh Anderson, CEO of Telephony Partners.

So, perhaps the most effective way to tackle the ethics quandary, at least in the short term, is to embed a code of ethics in agent agreements, Anderson said. Any violation would then remove an agent from the account in question, he said.

“I have to admit, though, it does seem a little bit of an over-engineered solution to the simple problem of people simply not doing the right thing,” Anderson added.

On the other hand, it’s important that agents also have recourse. The worry over ethics infractions goes at least two ways. Some carriers and agencies have been faulted for breaches such as not paying agents as promised or when, and, perhaps worse, competing with those agents.

In that instance, McLelan said, peer pressure can work as well as a licensing agency.

“Agents will quickly find a way to move their book of business if they feel they are being treated unfairly,” he said.

Still, the bottom line is that anti-agent competition “establishes a no-holds-barred type of environment that makes it very difficult to succeed ethically,” said Anderson. “As soon as one player decides to behave unethically, it puts all others at a disadvantage.”

Adam Edwards, president of master agency Telarus Inc., couldn’t agree more.

“We’re all better off, and create a successful environment, when we act ethically and shun those who don’t do so,” he said.

Some of the biggest setbacks he sees are: direct representatives owning agencies on the side, often in their spouses’ names; offers of residual commissions and then ceased payments; direct reps disparaging their channel counterparts to customers; kickbacks to clients as a services discount; agents getting credit for sales product by direct reps; and offering promotional pricing before authorized.

Just act honestly, Edwards said.

“Just because you won’t be caught doesn’t mean it’s appropriate,” he added.

Participants slated to join Bouchedid, McLelan, Edwards and Anderson at the general session include Michael Fair, vice president and general manager of alternate channels for One Communications and Chuck Wilcox, vice president and assistant general counsel for XO Communications (XOHO.OB). Larry Kesslin, president of 4-Profit LLC, will serve as moderator.

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