The dangers of corporate gifts

As you read this, a variety of corporate gifts are being delivered to executives across the world, possibly including yourself.

These gifts will not be from friends and relatives but from business associates who wish to establish or cement a business relationship. The main reason for these gifts is that they want something that you, in a corporate capacity, are able to give them. Corporate giving is seldom reciprocal, the one who receives the gift is usually the person in a position to influence the award of a contract. Rarely are corporate gifts given simply because the giver believes you to be a nice person.

Is there anything wrong with such gifts? Many corporate Christmas gifts, such as calendars, diaries and pens, are innocuous. They are usually of low value, primarily of a marketing nature and distributed to a large group of people in an open fashion. Such gifts should not be the subject of company concern.

However, more luxurious gifts, such as a food hamper or a case of champagne, which are sent to the homes of a few key individuals, should be brought to the employer’s attention.

Such gifts are potentially problematic because they can lead an employee, whether he or she is the sales director, the chairman’s personal assistant or the head of security, unwittingly into fraud. As long as such activities are properly controlled, they are not a problem. The trouble starts when an invitation to a golf day develops into a weekend at a sporting fixture in Paris or even a trip to the Olympics. The next step is a skiing holiday paid for by the supplier, and from there it is not a huge leap to the loan that is never repaid or any one of the other ingenious ways in which the payment of a bribe can be disguised.

Most people will agree that the calendar from the local photocopier company is harmless and that the all-expenses-paid holiday from a major supplier is not. But where do you draw the line? And why does there have to be a line, anyway? Most companies do not have a clear policy on what is acceptable as a Christmas gift from business associates, which is a danger.

The key is that employees need to know what they can and cannot accept. Failure to do so could lead to inconsistent standards within a company, with employees unconsciously overstepping the mark and a subsequent loss of confidence from people who rightly, or even wrongly, suspect a corrupt relationship.

It is tempting to provide guidance with a simple monetary limit, but cost is just one factor. Current company practice can range from a blanket “no gifts” policy to only allowing gifts that can be consumed or enjoyed within 24 hours of receipt. Some companies insist gifts are placed in a Christmas raffle so all employees have the chance to benefit.

Such policies have their merits, but they also have loopholes. For example, one business partner thought he had got round the no-gifts rule by inviting his main customer to a Christmas party, getting him to buy a large amount in raffle tickets, and then, to nobody’s surprise, arranging for him to win the first prize of a weekend for two in New York.

Another procurement manager was very keen on gliding, a hobby he could scarcely afford on his income. To help him out, his favorite refrigeration supplier paid him 20,000 euro  cash in exchange for advertising its company logo on the glider. This advertising was, of course, of little use to the supplier.

The resulting losses to the companies awarding contracts can run into millions, as tenders may well be awarded to those companies that have been generous with their corporate hospitality, rather than to the company offering the deal with the best value.

Even when these loopholes have been closed, the best policy is useless if it is not enforced. This means that it is no good informing an employee of the corporate-gifts policy the day he or she joins, and then expecting him or her to remember it 10 years later. To be effective, employees should be reminded of the policy each year and, ideally, be asked to sign a compliance declaration.

The policy as to what is, and what is not, acceptable should also be made clear to suppliers otherwise they will be spending money on gifts that are damaging, rather than increasing, their chances of being awarded business.

A gifts policy is an effective deterrent, but where it has not been successful, or perhaps not properly implemented, there are ways corrupt relationships can be detected. Tell-tale signs include regular excuses for not putting work out to tender; frequent orders just below the tender requirement threshold; and failure by other companies to submit bids, as they know it would be a waste of time and money. Other signals include rumors of out-of-hours friendships between buyers and suppliers; visits to factories overseas, especially those in exotic locations; or a buyer enjoying a lifestyle inconsistent with his or her known income.

Most recipients of bribes are formerly honest employees who have graduated from paid lunches to cash in brown envelopes without realizing the criminal implications of what they are doing. Companies owe it to their employees to remind them where to draw the line.