The president of the ad industry's self-regulatory arm has lost his job in a cost-cutting move ad groups fear could hurt the industry at a crucial time.
Wally O'Brien, 63, stepped down April 30 as president of the National Advertising Review Council and a VP of the Council of Better Business Bureaus. Several executives close to the situation said Mr. O'Brien, who is credited with raising the review council's profile with both federal regulators and major marketers, was forced out by money woes at the CBBB.
Those funding shortfalls may also prevent the hiring of a successor to Mr. O'Brien, a prospect that has ad groups up in arms.
The NARC oversees the National Advertising Division, which settles disputes voluntarily between advertisers on such issues as the veracity of ad claims, and plays a critical role in the process that minimizes the threat of government regulation.
The Council of Better Business Bureaus houses and funds the ad industry's self-regulatory operations. But the council saw a 4% drop in national membership dues to $2.4 million last year, a decline blamed largely on corporate mergers.
One result is that while the council increased funding for the day-to-day work of the ad unit this year by 9%, it yanked funding for the president position.
"The basic disagreement is whether the position is of critical importance," said Ralph Rydholm, the retired chairman of Euro RSCG Tatham, Chicago, who until recently was acting chairman of the NARC board. "They feel that while the position is nice, they can't afford it. The ad groups feel that it is important to continue the post, and having a leader who can speak for self-regulation in Washington and to the industry is critical."
HAUETER OVERSEES DAILY OPS
The council originally planned to cut Mr. O'Brien's position in January. But under pressure from the ad industry, it extended the post until the end of April.
Starting Monday, Eric Haueter, chairman of the National Advertising Review Board, will oversee day-to-day activities of the NARC's 13-member staff, pending a decision on whether to seek a new president. Mr. Haueter lives half the year outside the U.S.
The timing of Mr. O'Brien's departure comes as Congress explores ways to regulate online privacy and consumer sweepstakes.
The American Association of Advertising Agencies, Association of National Advertisers and American Advertising Federation all said last week they are concerned by the departure of Mr. O'Brien and that they will push for his post to be filled. The ad associations oversee the ad-review unit along with the CBBB.
"We are always concerned when resources are cut back," said Four A's President-CEO O. Burtch Drake. "It is important that the industry have a strong self-regulatory voice."
Mr. Drake said Mr. O'Brien's advertising background was important in convincing more advertisers to bring their disputes to NARC. He fears that trust will be broken if the CBBB assumes day-to-day oversight of the unit.
Before joining NARC in 1995, Mr. O'Brien was a longtime former J. Walter Thompson USA executive who once was vice chairman of JWT's board. He came to NARC from Ogilvy & Mather.
"In these disputes, you have to convince them to use the mechanism, then assuage them so one guy doesn't walk away and say he will never use it again," said Mr. Drake. "Wally has been an effective leader. We are going to miss him."
AAF: POST NEEDS TO BE FILLED
AAF President-CEO Wally Snyder said the post is "an important position to fill" and that he will work to raise the $300,000 necessary to pay the salary and travel costs of another executive.
"We really need someone to promote the system to the government and make advertisers aware of the advantages of self-regulation," Mr. Snyder said. "The more advertisers participate and recognize its importance, the less the FTC needs to get involved."
ANA President-CEO John Sarsen said the open spot creates "a disadvantage. I'm convinced the system needs a leader who can continue to raise visibility of the process, so more people use this as opposed to going to court."
James Bast, who is retiring as president of the Council of Better Business Bureaus, defended his group's move.
'MORE DEMANDS THAN MONEY'
"We always have more demands than money," he said. "The spending is up 9% [for the unit], which is higher than inflation. We are funding the real work at a higher level, and our priority is to fund the programs and keep the overhead low."
Some of the advertising groups suggested the position is more likely to be filled after Mr. Bast retires sometime this year after his replacement is found. But Cal Collier, CBBB chairman and a Kraft Foods senior VP-general counsel, said that's not necessarily the case. The decision, he said, rests more on whether there's an increase in national membership.
NARC was formed in 1971 by the CBBB and the three ad groups. Former AAF President-CEO Howard Bell said the ad industry and the council had both been considering separate plans to set up ad-review units at the time.
"We said, 'Why don't we join forces so we don't go to the same people twice?'" recalled Mr. Bell.
The resulting self-regulatory unit is often cited by Federal Trade Commission Chairman Bob Pitofsky as a model for industries to follow to avoid government regulation.
Copyright May 1999, Crain Communications Inc.