4 September 2012

Ethisphere recently published data about the codes of conduct of the companies comprising the Fortune  500. The authors have further summarised the data to identify the gift and hospitality standards specified in those codes. 

For businesses with a United States operation the good practice disclosed is helpful in determining how to avoid breaching the Foreign Corrupt Practices Act. The Act makes any offer, promise, or payment of value to a foreign government official an offence if the purpose is to obtain an improper business advantage. But the Act does not outline when things like gifts, entertainment, hospitality and travel amount to corruption. And there is no United Nations agency guidance associated with the UN Convention Against Corruption or OECD guidance on the Anti Corruption Convention which gives much help. The acceptability of facilitation payments can be a particular challenge.

Of the Fortune 500 codes of conduct reviewed, only 19 prohibit facilitation payments, although another 22 companies strongly discourage them.

But gifts and entertainment form part of almost all codes with 33% setting a value limit on gifts and 11% setting entertainment limits.

About a quarter of all companies limited gifts to a maximum value of US$100. Another 8% had the limit at US$250. Only 3% permitted gifts of more than US$250 (remembering that 66% had no gift specifications).

The companies generally had a substantially higher limit on entertainment expenditure.

The policies that do not give a specific monetary gift or entertainment limit typically require that gifts and entertainment be of “nominal” or “modest” value, “reasonable and customary,” or “not excessive in value.”  It is hard to determine whether that means more or less than the codes where values are specified.

The State Services Commissioner’s guidance indicates that gifts and hospitality can be accepted by State servants unless there would be a perception that someone  could benefit from influencing that official or their organisation… “… In all cases, it is expected that gifts will only be accepted following a transparent process of declaration and registration. To avoid misperceptions, it is essential that the process is public….”

The Auditor General’s guidance remains less pragmatic.  This is set out in paragraph 8.26 of the Sensitive Expenditure Guidelines – “ …We expect entities to:

  • require receipt of gifts, except for inexpensive gifts that are openly distributed by suppliers and clients, to be disclosed, to be recorded in a gifts register, and to remain the property of the entity;
  • allow staff to personally acquire only infrequent and inexpensive gifts that are openly distributed by suppliers and clients (for example, pens, badges, and calendars); and
  • have policies defining “infrequent” and “inexpensive” in relation to receiving gifts…”

http://ethisphere.com/rankings-and-ratings/

www.law.com/jsp/cc/PubArticleCC.jsp?id=1202569122050&Corporate_Anticorruption_Compliance_by_the_Numbers

www.ssc.govt.nz/sites/all/files/UnderstandingtheCode-April2010.pdf

http://oag.govt.nz/2007/sensitive-expenditure/part8.htm

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