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Philippa-Foster

Overcoming the Challenges of Gifts and Invitations Policies

Philippa Foster Back OBE is Director of the Institute of Business Ethics, a London-based professional organization devoted to encouraging high standards of business behavior based on ethical values.
More on Philippa Foster Back / More on the Institute of Business Ethics
  
What risks do companies face from not having a gifts & invitations policy? Usually, small amounts are involved –surely authorities have bigger fish to fry?
The giving and receiving of gifts and entertainment are commonly accepted business practices the world over.  They help to form and to strengthen business relationships and can be used to mark important business achievements.   Without guidance, it is hard to decipher when a gift might be inappropriate, or when a gift could be considered a bribe.   The giving and receiving of gifts, services and hospitality is closely related to the issue of conflicts of interest and can leave an organisation vulnerable to accusations of unfairness, partiality or deceit. Gifts can be used to influence and corrupt third parties or manoeuvre employees into a position of obligation. Commercial relationships may be subject to bias and a company’s ethical reputation will be at risk. At the worst end of the spectrum, organisations can find themselves accused of bribery and corruption, and could face fines and prosecution.    
Laws on gifts and invitations vary from one country to another. How should companies with operations in several countries structure their gifts and invitations policies?
Of all issue areas, gifts and entertainment is, perhaps, the most challenging because of cross-cultural and regional concerns.  Gift giving customs in different countries can be difficult to understand.   Policy documents must provide specific gift and entertainment guidance to employees to assist them in dealing with the challenges they will encounter in their jobs.  A sound standard should provide guidelines for giving and receiving gifts and entertainment; handling any exceptions to the guidelines; and gifts and entertainment to government officials and union representatives.   However, there are a number of practices pertaining to receiving gifts that merit discussion.  Almost unilaterally, company standards prohibit accepting cash gifts.  For most of the world, this position does not present a problem.  But in Asia, token cash gifts, known as ‘red envelopes’, are routine in business relationships.  As the amount of money in question is generally quite nominal (the act of exchanging the gift being more important than the financial amount of the gift), some companies make an exception of this practice, provided that it is approved through official channels and appropriately documented.  Companies may view this custom as not much different than the practise of cash ‘tipping’ in other cultures which is routinely allowed (excepting government personnel.)  Other companies have looked for alternatives by which they may respect the important custom without having to deal with cash gifts.  One solution is to alert business partners that employees may not accept cash gifts but that they may accept nominal sums of money that will then be given to a charity in their name.    
What questions should companies ask themselves before designing a gifts & invitations policy?
In the first instance, a policy on the giving and receiving of gifts and hospitality should be consistent with other aspects of the organisation’s ethics policy in encouraging high standards of personal honesty and integrity. It would be unacceptable, for example, to offer or receive corporate hospitality which might violate the ethical values of the giver’s/recipient’s company such as discriminating or causing offence on the basis of race or religion (for example a trip to a lap dancing club).   A risk assessment will help ensure that the policy will be effective for your organisation.  This would sit within a wider risk assessment concerning corruption:  
  • Does your company do business in countries which have a reputation for corruption (see the TI Corruption Perceptions Index)?
  • Identify whether your company does business in cultures where gifts and entertainment are perceived differently for example, where  not accepting gifts may cause offence.
  • Does your company currently have a culture of gift giving or receiving? How is this currently managed?  For example, do you offer any training, or operate a gifts register?
  • If your business involves procurement, handling tenders or dealing with government officials, staff may need special guidance.
  Identifying the answers to these questions will help ensure that the policy is relevant for your organisation, and so help to achieve buy-in.    
What are the main aspects of a formalized gifts and invitations policy? What are the steps to take?
A gifts and hospitality policy sets out:
  • what can be accepted without disclosure
  • what cannot be accepted or given
  • what should be recorded
  • how staff can seek further guidance
Because a policy cannot cover all situations, a clear set of decision-making principles will help employees make the right decision. These can take the form of questions. For instance:
  • Would you be embarrassed if anyone found out about the gift?
  • How would you feel if you read about it in the paper?
  • Does receipt of the gift or hospitality influence you in any way?
 
What are the biggest obstacles to implementing a gifts and invitations policy?
Some staff may feel that they are having long-established ‘perks’ taken away.  This need not be the case. The main message to get across to staff is that of transparency. Many organisations operate gift registers in which gifts over a certain value must be recorded. This helps to make the process open and transparent and avoids accusations of distortion. Gifts that exceed this value, but are impossible to decline, may be accepted on behalf of the organisation. Such gifts can be raffled at the end of the year to raise funds for a charity for instance.   Another core ingredient of implementing a policy successfully is leadership.  All management should also abide by the policy.  If employees see senior managers flouting the policy, they will do the same.   To ensure a transparent culture around gifts and hospitality issues, open discussion in the workplace should be encouraged. It is worth considering offering an advice line for staff to call for guidance and offering a training programme to provide staff with the tools to deal with dilemmas of this sort.   Asking questions in employee surveys to identify doubts and pressures on staff in this area can help identify training needs, and regularly auditing the gifts register will help determine whether the policy is understood.  
How can companies define what is “reasonable” and “acceptable” expenditure?
What constitutes a non-trivial gift or hospitality? Some companies help employees by putting a monetary limit on the value of gifts that can be offered or accepted, with those above a certain value considered as unacceptable. This can be difficult to judge. What may seem to be minor to a senior manager could be worth significantly more to a junior employee, and the duties of senior staff may require them to attend or sponsor events where hospitality is generous. Stipulating different monetary values allowed for different management levels can get complicated.   Policies often refer to appropriately priced gifts as nominal, of moderate value, or inexpensive.  Yet in the global marketplace, what is considered nominal in one location may be viewed as extravagant in another.  To provide additional guidelines in this matter, some companies will provide a guideline based on monetary value, e.g., not to exceed £50 or €50.  While such limits can be useful to home country employees, they can be problematic for employees working in other parts of the world.  While accepting a gift with a value of €50 in Europe may be authorised, accepting the same gift may not be acceptable in some African countries.   Two guiding principles will assist.  The first is whether business decisions are being distorted or future favour is expected as a result of the gift giving – this will be culturally specific. Another is the potential for any reciprocity, the absence of which will increase the likelihood of the receiver feeling beholden. In any case, it is transparency that is critical.   The IBE has a free briefing on this subject which may offer further guidance: http://www.ibe.org.uk/userfiles/briefing_3.pdf
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Contact the IBE: info@ibe.org.uk  
13 March 2012
Tags : gifts and invitations policies, anti-corruption programs, red envelopes, value thresholds for gifts and invitations, anti-corruption compliance
 



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