Quid Pro Quo

This for that

What is Quid Pro Quo?

In financial terms, quid pro quo is a mutual agreement between parties that gives consideration to each member of the party in exchange for the good or service which they both benefited from. This is similar to an exchange deal in which one company uses the services of another company in exchange of the that business’s products.  Other phrases interchangeably used in place of quid pro quo are:

  • a favor for a favor
  • give and take
  • tit for tat
  • something for something
  • you scratch my back, and I’ll scratch your’s
  • this for that
  • I give so that you will give

How Quid Pro Quo Works?

Although this term is always being used in legal and political perspectives, a concrete example related to business is bartering. It is particularly seen in start-up businesses where the inflow of cash is limited, and there is an opportunity to obtain goods or services without gambling income. No cash is exchanged, but instead, services are reciprocated by services.

Another example is the quid pro quo contribution, a donation in which the donor receives something of commercial value in exchange for the monetary grant he/she provided a company or institution. Like when someone donated $50 to a foundation, the institution gave the donor a pen with engraved markings worth $5 as a token of appreciation, and the net contribution made was $45.

Quid pro quo is also present in professional networking.  A business person can reach out to other professionals who share the same interest or passion. A business group is often created and one person can offer something of value to them like a relevant topic, essential to their business core competency, in exchange for services in the future. The quid pro quo is also important for those looking to network to start their career.

What are the Issues Encountered in Quid Pro Quo?

Quid pro quo agreements are occasionally viewed as unfavorable in a business setting. For example, in a reciprocity agreement between a big financial house and a certain company, the financial house might modify poor stock ratings in exchange for a stake in the company business. This is poor business practice and obviously violates regulatory rules. The company must put the customer’s interest first, before anything else.

In the political arena, quid pro quo is often construed as giving financial support to a political candidate in exchange for some future benefits or protection concerning a business operation. Quid pro quo may appear to be a bribe and in such a case, conflicts of interest must always be tested.

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