The Axis Corruption Cruise Returns

Author: John Honovich, Published on Jan 12, 2012

Last year, we examined how Axis paid for an expensive cruise for A&Es/security consultants and their wives, expressing ethical concerns. Unfortunately, this year, Axis is running yet another cruise that is basically a repeat of last year's. In this report, we further review the problems and recommend a solution.

[UPDATE Jan 18: Axis response to cruise criticism]

[UPDATE December 2012: Axis changes A&E event - drops cruise, adds charge for guests.]

The Key Concerns

The concerns focus on the 'extracurciulars' involved. While we have no objection to their 'education'/workshops, the cruise inherently packages that with two problematic elements:

  • Most of the time is dedicated to Axis funded parties, dinners, receptions and beach excursions
  • Axis is paying for consultant's spouses to join the cruise and attend various parties, dinners, reception, beach excursions, etc.

These elements are extremely expensive (our estimate: $1,500+ per consultant) and contribute little to no real education/ technical benefit. They are clearly gifts from Axis to the A&Es/consultants.

That noted, we would have no objection if these were Axis partners or employees. However, security consutants and A&Es are expected to be independent and to serve the interest of end users. Accepting significant gifts from a manufacturer violates the independence expected of consultants.

Restrictions Against Gift Giving

Most large companies or government organizations prohibit employees accepting gifts of anything more than nominal value. (see e.g., the US Department of Justice's strict rules against gifts to government employees or Wal-Mart's clear policy against accepting gifts). Indeed, a recent study showed that 32% of employees admitted that "a gift would actually influence their decision making." Because of these risks, typically companies restrict gifts to $20 - $100 at most, amounts far far below what Axis is gifting here.

A&E Code of Conduct Prohibits Gifts (Updated 1/15)

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In reviewing the Codes of Conduct of the world's largest A&E firms, they consistently have rules against accepting gifts. Here are a number of examples:

  • URS Corp: "Neither employees nor their family members may offer, provide or accept any gift or entertainment unless approved in advance by the employee’s supervising manager and not (a) a gift of greater than $50USD in value"
  • CH2M Hill: "Accepting or offering gifts or entertainment is generally discouraged and is permissible only in rare circumstances when gifts or entertainment are: Nominal in value"
  • Jacobs: "Accepting gifts of other than token or nominal value or excessive entertainment from an actual or potential competitor, supplier or customer is prohibited."
  • AECOM: "In order to maintain AECOM’s integrity and to avoid even the appearance of a conflict of interest, employees are generally required to decline all gift offers made in connection with their employment. Customary and inexpensive gifts of a promotional or seasonal nature or occasional courtesies ... may be accepted."

Accepting a cruise vacation for your wife violates gifts and entertainment rules typical for A&E firms. While A&Es and consultants should be held responsible for accepting such offers, one has to question why Axis would design an event that so obviously encourages attendees to violate their codes of conducts.

The Objections of the Community

When we ran the original article, nearly 200 community members voted in our poll. Nearly 2/3rds of respondents voted that attending the Axis event created a conflict of interest for security consultants.

Moreover, last year, the President of the Independent Association of Professional Security Consultant's flat out said that their "guidelines do not allow for manufacturers to pay for extended trips, vacations, expenses for guests, etc. Such activities would be reviewed as potential ethical violations." [emphasis added]

Indeed, similar trips / junkets are gaining international negative attention. Over the last few months, the New York Times has conducted an investigation of the 'Axis of education', Pearson, who has been funding vacations for their customers and drawing the ire of the public.

The Counterargument

The two most common counterarguments rebutting our concerns are:

  • "Everybody does it" - This argument emphasizes that lots of big companies do it -- whether in security, telecom, construction, etc. Nonetheless, a defense of 'But everyone's a criminal' simply has no ethical weight.
  • "It doesn't guarantee Axis gets the project" - This argument emphasizes that the cruise is not a straight payoff (which we agree with). However, the issue for most is gaining undue and unfair influence, not simply straight payoffs. Hardly anyone would agree that it's OK to slip consultants iPhones or hundred bills simply because it does not 'guarantee' a specific quid pro quo.

How This Corrupts

Such gifts are a powerful and unfair force in influencing business for three main reasons:

  • Ensuring the vendor is top of mind: Getting consultants to spend an extended weekend with a vendor gives that vendor a huge advantage in who the consultant thinks of and what technologies to consider when future projects come up. This is often called "Top of Mind Awareness" and is well regarded as a key element in sales and marketing. The problem here is that the vendor is achieving this through providing an expensive gift to the consultant (the dinner, drinks, beach trips)
  • Reciprocity: Paying for a consultant and their wife's vacation creates a natural expectation of reciprocity, making the consultant more likely to favor the vendor's future requests. This is a simple fact of human nature, shown repeatedly in psychological studies and most famously in Cialdini's 6 Principles of Influence.
  • Liking: Paying for extended partying, drinking and going to the beach with the consultant and their spouse gives the vendor's sales team an opportunity to build friendships that helps increase the influence the vendor has with future specifications of the consultant. Again, this is validated in psychological studies and in Cialdini's 6 Principles of Influence.

I can already hear vendor's objections - "But this is how sales work and how it always has worked." To the extent that the vendor does this through good service to the community and building up word of mouth among satisifed users, this is great for everyone. However, when it is funded by paid vacations, it creates undue and unfair influence.

What Axis is Paying

Think about what Axis is paying for this event. It is easily in the hundreds of thousands of dollars - minimally $150,000 in our estimate (~100 consultants times $1,500 each) for a 3.5 day event.

Since less than 15 hours are actual workshops/sessions, Axis could compress this into a day and a half or even a more streamlined single day event. Dropping the extended parties, beach excursions, etc. and the cost would drop dramatically to $10,000 or $15,000.

Why is Axis paying hundreds of thousands more than they need to inform these consultants? We think it is clearly an investment in gaining an undue and unfair advantage.

[Updated 9/15] Why does Axis charge integrators for training but gives a workshop and vacation for free to A&Es and consultants?

The Final Counterargument

One other strong counter argument from other manufacturers has been privately shared with me: Many feel forced to do these events or provide other 'incentives' to consultants; Many consultants expect these handouts as basically the price of admission. If the manufacturers do not play, their competitors will and they will be at a disadvantage.

How much responsibility goes to the manufacturer versus the consultant in this situation is hard to truly determine. No doubt though the result is a corrupted practice that favors those giving handouts.

Axis's Opportunity

In the last few years, Axis has established itself as a leading force in the industry, successfully championing technologies and practices (H.264, ONVIF, HD, etc.). Axis has the power and the opportunity to champion changes in business practices as well.

Rather than parrot good ol' boy ways, Axis should do the right thing and champion more ethical business practices in the surveillance market. Indeed, given their strong technology portfolio, Axis could actually benefit from pushing consultants and the industry to clean up these shady tactics.

These events will end. Social media and the Internet will increasingly shine a powerful and disinfecting light on corrupt practices that have been hidden for years (e.g., the number of people clicking on the consultant group photo last year was shockingly high). Axis should recognize this and get ahead of the curve.

However, if Axis is not willing, this is a real opportunity for Axis's competitors to take a stand against corrupt practices and differentiate themselves as companies who refuse to engage in such bad behavior.

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