ANALYSIS: PR Ethics - Parting isn't easy, but try doing it with class - Agency breakups happen. Some get rather ugly, while others are engineered with care. Kimberly Krautter compares partings, good versus bad

For the Atlanta business community, it was deja vu. The announcement that Cohn & Wolfe Atlanta CEO Tony DeMartino (along with 10 top executives) had been fired for taking time away from work to plan for the opening of his new agency was eerily similar to a defection from Manning, Selvage & Lee's Atlanta office that had occurred five years before. Splashy headlines cast the players in a negative light as reporters uncovered investigations, dismissals, lawsuits and counter lawsuits. Clients and staff reeled from the shock and ensuing leadership vacuum. Account work in progress came to a halt, and competitive agencies were poised to prey on the client and staff fallout.

For the Atlanta business community, it was deja vu. The announcement that Cohn & Wolfe Atlanta CEO Tony DeMartino (along with 10 top executives) had been fired for taking time away from work to plan for the opening of his new agency was eerily similar to a defection from Manning, Selvage & Lee's Atlanta office that had occurred five years before. Splashy headlines cast the players in a negative light as reporters uncovered investigations, dismissals, lawsuits and counter lawsuits. Clients and staff reeled from the shock and ensuing leadership vacuum. Account work in progress came to a halt, and competitive agencies were poised to prey on the client and staff fallout.

For the Atlanta business community, it was deja vu. The announcement that Cohn & Wolfe Atlanta CEO Tony DeMartino (along with 10 top executives) had been fired for taking time away from work to plan for the opening of his new agency was eerily similar to a defection from Manning, Selvage & Lee's Atlanta office that had occurred five years before. Splashy headlines cast the players in a negative light as reporters uncovered investigations, dismissals, lawsuits and counter lawsuits. Clients and staff reeled from the shock and ensuing leadership vacuum. Account work in progress came to a halt, and competitive agencies were poised to prey on the client and staff fallout.

Certainly this phenomenon is not new, nor is the gut-level instinct to act on entrepreneurial desires fundamentally bad. The manner in which such moves are managed, however, is the measure of the players involved.

While some say 'business is business,' others say 'this is the PR business' and think agencies should adhere to higher moral standards.

This latest agency defection comes just as the PRSA is making its first substantial move to address ethics in 10 years. According to Robert Frause, president of the Frause Group and chairman of the PRSA Board of Ethics and Professional Standards, the new code of ethics requires practitioners to answer simple questions about fair play and business conduct.

'The test is if an agency employee solicits clients or staff. Then they are not just in trouble ethically, they are in trouble with the law,' says Frause.

And in the Cohn & Wolfe case, the former Atlanta CEO is charged with doing just that. Worldwide CEO Steve Aiello claims that DeMartino and three former senior managers in the Atlanta office directly solicited Cohn & Wolfe clients and staff members on agency premises and while acting as company officers. Aiello has backed up his claims in a lawsuit charging misappropriation of trade secrets and tortuous interference, and is asking the court to force DeMartino and company to halt unfair competition.

To date, DeMartino categorically denies the charges. He has filed a counter claim in court stating that since Georgia is a right-to-work state, he and his partners are not bound by non-compete and non-solicitation agreements, even if they signed them.

This drew a strong reaction from Frause. 'I think that's a crock. I don't care what laws back that up, you gave your word. Even if you had your fingers crossed behind your back when you signed it, to me that's despicable.'



Moral high ground

So how should these sticky situations be handled to ensure the least stress for all involved? There are examples that have managed not to attract bad feeling or legal action.

As the Internet boom dawned over Silicon Valley in the early 1990s, Sabrina Horn was a senior account executive with Blanc & Otus based in San Francisco.

With a burning desire to do her own thing, she spent her two-week vacation from the firm to test her resolve, write a business plan and knock on a few doors. At the end of those fourteen days, she had bagged PeopleSoft, a then nascent Internet business powerhouse. When she returned to work she met with her boss, mentor and friend Maureen Blanc to discuss her decision.

'I was extremely concerned about even the slightest appearance of impropriety because I needed her professional support and friendship,' says Horn, now president and CEO of the Horn Group. 'I went so far as to offer that piece of business to Blanc & Otus.'

Horn says the protocols she used were instinctive. 'I refused to take their business and I voluntarily wrote a letter to them that I would not take any of their people for one to two years,' she remembers. Today, though the agencies occasionally compete for business, they still play by the unwritten rule of not hiring staff directly from each other.

Blanc & Otus encountered another similar situation five years after Horn's exit. Margit Wenmachers and Caryn Marooney, both members of the management team, decided to surf the dot-com wave. And like Horn, they employed a full disclosure strategy upon leaving to form the agency OutCast Communications.

'Our goal was very much to make this breakup a cordial thing,' recalls Wenmachers. 'We gave them time to think about and plan (for our departure), so when we left everyone was very used to it.'

Although their initial meeting with Blanc occurred in February 1997, they didn't leave the firm until June 30. Wenmachers says she felt a responsibility to the agency to complete outstanding work and smooth the transition for remaining staff and clients.

'The relationship was more important than the short-term gains of taking employees or clients,' she says.

The Horn Group and OutCast examples prove that start-up ventures do not have to result in agency instability. 'Breakups and departures like that are never easy because you're losing a person who is an asset to the mother ship,' says Horn. 'The key is to handle everything professionally.'



Ending in tears

The danger of a more confrontational approach is that things don't turn out well - for either side. That was certainly the case with the MS&L defection in 1995. Joseph Ledlie, then general manager of MS&L's Atlanta office, his deputy general manager Glen Jackson, and a top account team manager, Bolling Spalding, abruptly departed to open a new agency dubbed Jackson Spalding Ledlie. They took eight of MS&L's 15 staff members in the process, and directly pitched the agency's clients. Suits and countersuits were lodged in the Georgia courts, and a protracted media battle ensued.

International industrial design and construction company Lockwood Greene Engineers got caught in the maelstrom. VP of corporate development Bruce Dell, who was VP of marketing at the time, remembers feeling caught between competing interests and loyalties and facing tough questions about his vendor choices from his superiors.

'The major thing was ethics,' explains Dell. 'I was fielding questions from our senior management about working with people who would think to break up a company with which they were attached. They asked, 'How do we know they won't violate our trust.''

Ultimately, his company's 10-year relationship with Jackson helped Dell decide to give the agency the benefit of the doubt. The net result, however, was not a resounding win for Jackson Spalding Ledlie; the controversy expedited Lockwood Greene's review of their entire PR focus. Largely because of the defection, the company decided to splinter its PR assignments among a cache of agencies. MS&L was included in that initial mix.

Clients caught in the middle of ugly agency breakups suffer significant consequences. Dell said he was distracted by the swirl of legal controversy and trying to protect his company name from being mentioned in the context of it. And he was further polarized by agencies and others pitching for Lockwood Greene's business and loyalty. 'You get a lot of pressure to attend presentations,' says Dell. 'Then there is a delay in our work initiatives.'

Cohn & Wolfe's top clients, Coca-Cola and BellSouth, are so far keeping their own counsel on how the DeMartino spat is affecting their PR plans.

But it seems likely that they are not going to be happy about attention to agency politics rather than their business.





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