So it’s been a long hard day of sales followed by an even sweating over a client term-sheet with team member from risk. Its 10:15 pm and you decide to call it a day. You both decide to take the edge off and stop for drinks on the way home. You decide to pick up the tab; its your client that he’s been sweating over, after all. Harmless gesture right? Wrong.
A meal with a colleague or a client or a vendor might seem harmless but, it’s essential to be aware of the potential compliance risks that can arise from gifts and entertainment in the workplace. Companies and organizations have strict gift and entertainment compliance approval policies to prevent any actions that could lead to potential conflicts of interest, bribery, or violations of anti-bribery laws, such as the FCPA regulations (foreign corrupt practices act).
In the scenario mentioned above, let’s say the client term-sheet is signed but the deal turns out to be an overly risky bet and turns sour. Law-suits and losses follow. An argument may be made that the risk team member signed off on a term-sheet while turning a blind eye to the risks based on undue influence of a sales-person who wined and dined the risk team member because he stood to benefit personally from the resultant bonus.
This may even sound like an exaggerated dramatization of an innocent meal amongst work colleagues. Perhaps it may appear pieced together in hindsight to fit a narrative. Regardless, the damage is hard to undo and allegations harder disprove when seen together with subsequent events.
Let’s take another example. You are out with a vendor looking at properties. You wind up staying too long at a property because you really liked it – the location, approach and convenience in that property more than outweighs the minor premium the vendor is asking for. Your vendor suggests a break to unwind at dinner. You order particularly fine Cabernet Sauvignon. The vendor picks up the check and you head off. Over the next few weeks you close the deal. A vendor who owns a competing property turns up with an allegation on you that you were “bribed” for selecting the property you did which is the only reason you would have agreed to pay more for the said property. You, of course, suggested paying the premium for the property because of the better location approach and convenience, not because you were “wined and dined”.
Unfortunately, the perceptions can be damaging especially when false motivations are assigned. These perceptions themselves are not baseless and get formed because of real instances of unethical behavior.
This is why gifts and entertainment policies are critical for businesses and how compliance management helps maintain integrity and transparency.
Gifts and Entertainments: Understanding Risks in the Workplace.
Offering or receiving gifts, expenses incurred ‘on-behalf-of’ hospitality, or entertainment as part of a business relationship may seem like a gesture of goodwill. However, these activities can easily lead to employee conflicts of interest if not handled properly. The issue arises particularly when the said gifts, entertainments or hospitality could influence decisions or actions that conflict with the organization’s interests, such as, like in the examples provided above, ignoring risks while discussing a client term sheet or finalizing a property that costs more. Such actions, even if unintentional, could breach employee ethics compliance and may violate anti-bribery regulations.
The bribery act 2010 and FCPA regulations set clear guidelines for what is considered acceptable in terms of gifts and entertainment. While gifts or hospitality may be offered in good faith, companies need to ensure they are not construed as bribery or a conflict of interest.
Compliance Approval
To manage risks associated with gifts and entertainment, organizations implement policies for gift and entertainment compliance approval to ensure that employees understand the limits and conditions under which gifts can be offered or received. For instance, corporate gift policy limits often include strict guidelines about the value of gifts, the type of gifts, and the circumstances under which they may be given. The key aim is to ensure that no gift or entertainment could be interpreted as an attempt to influence business decisions.
By establishing compliance pre-approval processes, companies can track any potential gifts or entertainment offers to ensure they don’t breach the company’s ethical standards. So, before dinner with a work colleague, make sure it aligns with your company’s guidelines, ensuring your actions stay within the bounds of compliance in organizations and employee ethics compliance. Take pre-approval wherever you can with compliance software like Affinis(GNE). Be sure to note and follow the conditions of the approval, if any are added.
It may just land up protecting you from a world of grief.
