Commission Payment Under a Marketing Agreement

CE 480

Smith, an engineer, has been engaged extensively in engineering activities in the international market. Smith intends to expand his services into marketing consulting, drawing upon his experience and personal contacts in the international arena. He will offer to represent firms that want to work overseas but lack the special background knowledge required or the special resources to develop the necessary skills -- or are reluctant to expand their resources to develop their potential for overseas work.

Smith drafts a marketing agreement that proposes to develop contacts within stated geographical areas, evaluate potential projects, coordinate project development, and work out the terms of contracts between new clients and the represented firm. For these services, Smith will be paid a basic fee plus a retainer. Both fees will be negotiated individually, case by case. Smith will also receive a marketing fee, which is a negotiated percentage of the fees actually collected by the firm he represents, for projects he markets.

Questions:

(1) Is it ethical for an engineering firm to enter into a marketing agreement to pay a percentage of fees collected for projects marketed?

(2) Does it make an ethical difference that Smith is an engineer rather than, say, a marketing firm?

(3) Is there any additional information that would change your assessment of the situation?