Why Commission Structures Shape Behaviour More Than Ethics

In off-market transactions—whether commodities, energy, property, or other private deals—ethical failure rarely begins with bad people.

It begins with bad structures.

Most brokers, intermediaries, and introducers do not wake up intending to behave unprofessionally. Yet time and again, transactions derail not because of technical issues, but because incentives quietly distort behaviour. When that happens, ethics are not overridden by greed—they are crowded out by structure.

This article explores an uncomfortable but necessary truth:

commission structures shape behaviour far more reliably than ethical codes ever will.

Commission Is Not the Problem

Let’s be clear from the outset.

Brokers are entitled to earn commission. Intermediaries add value by connecting parties, managing process, and enabling execution. There is nothing unethical about wanting to be paid well for doing that job properly.

The issue is not commission itself.

The issue is how commission is structured, discussed, protected, and prioritised, and what that structure incentivises people to do under pressure.

In our experience, when incentives are misaligned, even well-intentioned brokers can drift into behaviours they would not openly defend, yet privately rationalise as “just how the market works”.

Ethics Rarely Fail First — Incentives Do

Ethical codes rely on individual restraint.

Incentive systems, by contrast, operate continuously and impersonally.

Behavioural economics has shown us something the market already knows intuitively:

people adapt to the system they operate in.

If a system rewards:

• higher percentages over higher probability of execution
• exclusivity over collaboration
• opacity over transparency
• protection of fees over protection of process

Then the system will reliably produce:

• elongated broker chains
• mandate contamination
• information hoarding
• mid-deal re-trading of economics
• process theatre instead of progress

Not because people are unethical—but because the structure quietly rewards these outcomes.

The Percentage Trap: A Familiar Failure Mode

One of the most persistent distortions in off-market transactions is the obsession with commission percentage.

Brokers fixate on “their number” while losing sight of:

• absolute dollar value
• likelihood of execution
• time to close
• reputational capital
• repeatability of future deals

A smaller percentage of a deal that closes will always outperform a larger percentage of a deal that never executes.

Yet poorly designed commission structures push participants to:

• defend headline percentages at all costs
• resist grouping or consolidation
• introduce unnecessary intermediaries
• delay alignment while “protecting position”

Ironically, this behaviour often destroys the very commission it seeks to maximise.

When Structures Misalign, Predictable Behaviours Appear

Rather than listing individual bad acts, it is more useful to observe patterns. When incentives are poorly designed, the same behaviours emerge repeatedly:

Common Distortions Created by Bad Commission Structures

• Chain elongation – additional intermediaries added to justify incremental fees
• Mandate misrepresentation – authority overstated to protect positioning
• Economics re-traded midstream – once deal momentum builds
• Information hoarding – access used as leverage rather than facilitation
• Artificial complexity – excessive paperwork to mask lack of progress
• Risk asymmetry – others carry execution risk while fees are front-loaded

None of these behaviours improve execution. All of them increase failure rates.

Earning Commission vs Extracting Commission

A useful distinction is this:

• Earning commission is an outcome of execution
• Extracting commission is a behaviour that often undermines execution

The most successful brokers understand that their long-term earning power comes not from any single deal, but from:

• trust
• speed
• discipline
• repeat engagement

Ethics, in this sense, are not a moral stance—they are a commercial strategy.

A Structural Alternative: The Five-Group Model

At Finova, our approach has been shaped by repeated exposure to transactions that failed for avoidable, structural reasons. One response has been to anchor commission logic around defined economic groups, rather than open-ended chains.

The principle is simple:

Clear roles. Clear grouping. Equal economic participation at group level.

The Five Groups (High-Level)

While details vary by transaction, the model broadly aligns participants into:

On the Sell Side:

• Seller mandate and their defined consultants

On the Buy Side:

• Seller Introducers
• Facilitator
• Buyer Introducers
• Buy Mandate

Each group:

• consolidates internally
• aligns interests within the group
• receives an equal share at group level

This does not imply equal contribution or effort.

It does mean aligned incentives, reduced friction, and fewer reasons to game the process.

Equal does not mean identical. It means structurally aligned.

Why Good People Behave Badly in Bad Structures

This is the part often missed.

When commission systems:

• reward early positioning over late execution
• punish collaboration
• leave economics undefined until momentum builds

They place individuals under constant pressure to protect themselves.

Under those conditions, ethical behaviour becomes fragile—not because people lack standards, but because the system penalises restraint.

Good structures remove that pressure.

What Good Looks Like (Code-of-Conduct Adjacent)

Across successful transactions, the same principles recur:

• roles defined early
• economics agreed upfront
• grouping encouraged, not resisted
• disclosure treated as professionalism
• execution prioritised over optics

These are not idealistic aspirations. They are execution disciplines.

A Quiet Note for Buyers and Sellers

If you are on the buy-side or sell-side, early signals matter.

Watch for:

• disproportionate focus on fees before feasibility
• resistance to grouping or transparency
• repeated re-papering of protections
• unclear or shifting authority claims

These are not accusations. They are indicators of structural misalignment.

Closing Thought

Ethics do not fail in isolation.

They fail when systems make ethical behaviour commercially irrational.

Design better structures, and behaviour follows.

At Finova, our experience has been consistent:

when incentives are aligned around execution, professionalism becomes the default—and commission becomes the outcome, not the objective.

Interested in Finova’s Execution Standards?

Buyers, sellers, brokers, intermediaries, and introducers may request an overview of Finova’s execution standards and broker code of conduct by contacting the team directly.

Professional alignment precedes successful execution.