Corporate gifts: acceptable practice vs corruption

By Cynthia Schoeman
Extracted from Ethics Can

The giving and receiving of gifts is especially prevalent at this time of the year. This not only highlights the question of what is and is not acceptable and ethical, but also increases the potential for abuse.

In response to the possible negative aspects of gifts, many organisations adopt a no gift policy. Some companies that offer public services go as far as to issue press statements to remind the public that it is against company policy for their staff to accept gifts. Many other organisations accept that occasional gifts shared between people with whom the company does business is not unusual, but rather a part of normal social exchange.

Organisations should have a very clear gift policy to ensure that the line between corruption and acceptable practice is clearly understood and that the potential for abuse is minimised.

Gift policy guidelines

The gift policy should clarify the criteria regarding the giving and receiving of gifts and clearly distinguish between behaviour that is considered normal and acceptable in relation to gifts, and what is regarded as unethical, criminal or contrary to good corporate governance and best business practice. The key issues that need to be addressed are as follows:

Definitions: To ensure the highest level of clarity, the policy should include definitions for key terms and concepts. In most instances sound definitions are contained in the Prevention and Combating of Corrupt Activities Act (No. 12 of 2004).

For example, the act defines gifts very comprehensively under various terms: gratification, property and valuable security. A gift can be considered any tangible article, benefit, favour, gratification, product discount not in the normal cause of business, commission, occasion, entertainment or function (such as sporting event tickets) that is given to the employee to keep, use or attend at no cost. A gift can include anything of value given or received as a result of a business relationship for which the recipient does not pay fair market value.

The definition of gifts should be extended to apply to both direct and indirect gifts. Therefore, a gift given to or received by an employee’s spouse or family member should be considered a business gift if motivated by or related to a business relationship. Such gifts should be subject to the gift policy in the same manner as other gifts.

The following terms should also be defined – acceptor or recipient; corruption; donor, giver or briber; and induce and improper inducement.

Unacceptable gifts: The policy needs to set out what is not acceptable and what employees may not accept. The most common mechanism is to specify a monetary value above which gifts may not be accepted. In the event that the recipient is uncertain about the value of the gift, the policy should direct the recipient to consult a superior, such as his/her line manager or the ethics officer, who should be empowered to make a final decision.

Typically, this section of the policy would specify the circumstances under which it is not permissible to accept a gift, such as the following:

• employees may never solicit gifts from any third party under any circumstances;
• gifts in the form of cash (including cash vouchers and gift vouchers), shares or leisure gifts (such as flight tickets and accommodation) are not permissible under any circumstances;
• a gift may not be accepted at all under the following circumstances:
  • when it is given in order to obtain a business favour;
  • when it is accompanied by any direct or indirect suggestion, hint, “understanding” or implication that some expected or desirable outcome is required in return;
  • when it is intended to act as an improper incentive or to exert an improper influence on the recipient, for example, to influence the decision to do business with the giver;
  • when it has the appearance of improperly influencing the recipient.

Acceptable gifts: The policy should define what the company considers acceptable gifts. Normally this would include conventional hospitality, infrequent and modest tokens of appreciation and small, unsolicited gifts of a promotional nature that bear a company logo or advertising. For added clarity, the value of these gifts should be defined as below the threshold for unacceptable gifts.

Approval and declaration: Even if the policy defines what may and may not be accepted, it is still best practice to have a clear approval and declaration procedure. Ideally all gifts should be approved. For example, the line manager of the employee who received the gift should sign off the gift. Similarly, the company should have a gift register and all gifts should be declared and recorded.

Procedure for gifts that cannot be kept: The policy should detail what employees should do when gifts cannot be accepted, such as returning the gift to the donor within a particular time frame.

Offering and giving gifts: This section should include the same criteria that are applied to the acceptance of gifts. Thus, ideally, gifts to clients or other stakeholders should be uniform and branded. It is also useful to issue all client gifts at a specific time of year (such as at year-end) so that there is no inference of either favouring specific clients or attempting to influence corporate relations. Regular and on-going entertainment of the same customers or suppliers should be discouraged on the grounds that it may create a suspicion of impropriety.

• Cynthia Schoeman is the founder and MD of Ethics Monitor, an organisation that promotes the proactive management of workplace ethics. It also provides practical support to organisations to improve and more effectively manage their ethics.