The ethics of giving and receiving corporate gifts can be confusing, and require care and attention to cultural sensitivities

The end of year festive season can have an impact on business life beyond office parties and time off work. Ethics and compliance specialists may dread this time of year, as the subject of gifts and hospitality bring up a number of ethical challenges. You may feel like the office Grinch dictating that gifts and hospitality cannot be given or accepted.

There is no doubt that the giving and accepting of gifts and hospitality has an important role in facilitating business relationships and practice. A meal out with a supplier can help build a relationship; a pen with your firm’s name on it can remind a customer of you when they need a quote.

At times however, the line between what constitutes a gift or hospitality and what constitutes a bribe, can be unclear and the acceptance of gifts, services and hospitality can leave an organisation vulnerable to accusations of unethical, or even unlawful conduct.

When is a gift not a gift? First, consider what the point of the gift or hospitality is. Is it to influence a relationship or induce improper conduct? Or is it simply a token of thanks?

What’s the expectation?

It goes without saying that if the aim is to create an expectation of a “favourable” act in return for the gift or hospitality, then it probably isn’t a gift.

Timing is also of key importance. Are you on the brink of closing a large deal with a customer that if secured, would increase your end of year bonus by a not insignificant amount? Or are you being offered a gift shortly before or during a tendering process? It is not just giving but also the accepting of gifts and hospitality that is punishable under the UK Bribery Act.

Consider the appropriateness of the gift and whether it is proportional to the level of the recipient. If a middle manager seeking a new job offers centre court Wimbledon tickets to a senior manager in another company, would that be considered appropriate or proportional? Common sense would suggest not.

What constitutes a “lavish” gift or hospitality can be difficult to judge. For example, the duties of senior staff may require them to attend or sponsor events where hospitality is generous. What may seem minor to a senior manager could be significantly more valuable to a junior employee. Sometimes, the exact value of a gift or hospitality can be hard to determine. There are also cross cultural considerations; a gift valued at £20 may be considered as low value in the UK, but could be considered as lavish in some less developed economies.

Pick the person

Who is the gift for? Giving gifts or hospitality to certain persons, for example public officials, is often construed as a facilitation payment and arouses suspicions. However, definitions of what constitutes a public official can vary. In many countries, it can be difficult to tell the difference between an employee in a state owned enterprise and a member of the government who is also working within the state owned company.

A principle sometimes applied to determine what is an appropriate level of gift giving or hospitality is that of reciprocity, ie if I accept an offer, am I able to offer the equivalent in value in return? For example: “If my supplier offers me tickets to the theatre, would I be able to reciprocate?” If the answer is “no”, then it may be seen as an attempt to buy favour and it is advisable not to accept.

How can companies support staff? Many companies take a zero tolerance approach to gift and hospitality giving and receiving. However, this isn’t always the most practical approach and can mean employees find themselves in awkward situations having to publically decline the gift or hospitality.

This is particularly true for employees of multinational companies operating in countries where gift giving is an important cultural tradition and instrumental in building professional relationships such as the giving of red envelopes for Chinese new year. Some companies have opted not to implement a global blanket ban, but rather they have set out locally determined limits for the value of gifts and hospitality that may be given or received.

Additional policies might be put in place when it comes to public officials, such as lowering the value limit on gifts/hospitality or requiring employees to obtain management approval, regardless of the value.

Clear policy

Employees need guidance on the company’s protocol on giving or accepting gifts or hospitality. This includes seeking approval from their line manager or someone more senior, recording it in a gifts and hospitality register. Sometimes gifts of a high value might be required be donated to charity or to the company. Gifts of high value can then be auctioned at the end of the year to raise funds for charity, for example.

Guidance is usually found in a company’s code of ethics or gift and hospitality policy. This will outline the company’s position on gifts and hospitality, what constitutes gift giving and hospitality and set out good practice for employees. A gifts and hospitality policy needs to be consistent with all other aspects of an organisation’s ethics programme in encouraging high standards of honesty and integrity in decision-making and behaviour.

So, there’s no need to be a Grinch. Communicate your gifts and hospitality policy to employees and others you do business with; encourage employees to consider the ethical implications before giving and receiving gifts; and offer additional support for those who work in cultures with different gift-giving norms.

This will save both sides embarrassment and, potentially, your organisation’s reputation.

Judith Irwin is a senior researcher at the Institute of Business Ethics. An IBE briefing, The Ethics of Gifts and Hospitality, is available as a free download.

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