Note that this guidance is in relation to gifts, hospitality and entertainment which are being given or received in a business context, and is not applicable to any such benefits given entirely in a personal context (e.g. between family and friends).
(1.1) What is a gift?
A gift is something given voluntarily, without the expectation of anything in return. It is normally associated with family or friends in circumstances where there is no business context, and is normally linked to some event (e.g. birthday, wedding).
A gift can be cash, or an asset (e.g. a watch, pen, bottle of alcohol).
A gift could be considered to be a bribe if it is given or received with the intention of influencing someone to act improperly, or as a reward for having acted improperly.
It is questionable whether a gift in the true sense of the word can be given in a business context. Businesses do not normally undertake acts without the hope or expectation of something in return. However, there can be cases where there is genuinely no expectation in return, or where this expectation is not corrupt, in that the gift may for example be given simply as a customary memento of an event (e.g. a signing ceremony for a major contract), or as a promotional reminder of the organisation’s name (e.g. a branded pen or desk ornament). However, in a business context, there is a very fine line between a gift and bribery. The giving and receiving of business gifts therefore requires extreme caution.
(1.2) What types of gift are not likely to be regarded as corrupt?
Gifts which are not likely to be regarded as corrupt include:
- company branded gifts of low re-sale value (e.g. a paperweight, pen, framed photograph, or a miniature of the company’s product);
- a single bottle or alcohol or perfume which is not unduly expensive.
However, these relatively low value items could still be regarded as corrupt if the circumstances of the gift were inappropriate (e.g. giving a bottle of whiskey to a customs official who is responsible for clearing the organisation’s goods, or to a public official who issues work permits).
(1.3) What types of gift are more likely to be regarded as corrupt?
Gifts which are more likely to be regarded as corrupt include:
- cash or cash equivalent vouchers;
- assets with a re-sale value which is more than nominal, e.g. watches, jewellery, television, computer;
- bottles of alcohol or perfume which are expensive.
(1.4) Traditional or customary gifts
In some societies, gifts may be said to be customary under local tradition. However, when the gift is to be given or received in a business context, further enquiry should determine whether such gifts are legal under local law, whether the apparent custom is in fact a genuine custom or simply a ruse for bribery/extortion, and whether it is understood within the particular society that, even if it is a genuine custom, the corruption risk may justify non-compliance with the custom. For example:
- It may be a genuine local custom to give a cash donation to the family of a manager of a business associate in the event of a birth, wedding or death in the manager’s family. In these cases, it may be acceptable for an organisation to give the cash donation, but extreme caution needs to be exercised to ensure that the gift cannot be interpreted as having an intention to improperly influence the recipient (for example if a contractor gives a donation to a manager of a client, it could be perceived as an attempt to influence a tender, or other contractual benefit). To guard against this risk, any gift given should be of a relatively small value. It may be preferable to overlook the custom and make no gift at all (with a suitable explanation that the applicable laws or procedures relevant to the organisation do not allow it), or to substitute the cash gift with a non cash alternative (e.g. flowers or similar token). The corruption risks of giving/receiving gifts is increasingly known and understood by all cultures, as are the strict controls put in place by many organisations. Therefore not giving gifts at all or giving low value gifts is becoming increasingly less likely to cause offence.
- It may be regarded as a cultural tradition for a village leader of a rural community to be given a cash gift before a meeting with the leader. However, if the leader is likely to refuse a meeting without a gift, then it is doubtful that it is a gift – it is more likely to be seen as an access fee where the leader is permitted by law to receive this fee, or as a bribe if the leader is not permitted by law to receive this fee. The former would be acceptable to pay; the latter would not. The gift is unlikely to be a bribe if the visit is only a courtesy visit and the village leader has no decision making authority or influence over a decision. In some cases it may have previously been acceptable to give a customary gift, but this may no longer be acceptable as a result of widespread law changes. Therefore, care needs to be taken to ascertain the relevant applicable laws and circumstances before giving a customary gift. If in doubt, do not give it, and politely explain that you would like to have made the gift, but that the laws of your country and your organisation’s rules simply do not permit it.
- Some countries have parallel systems of national law and customary law, and it may be the case that the national law permits activities which are practised under customary law. Legal advice would need to be taken.
(2.1) What is hospitality?
Hospitality is primarily the provision of meals and refreshments. The purpose of legitimate business hospitality is normally:
- to provide coffee, tea, sandwiches and other refreshments during a business meeting;
- to enable the personnel of two or more organisations to get to know each other better by having a reasonably priced lunch or dinner so that their working relationship is more efficient;
- to look after visiting personnel from another organisation in a reasonable and hospitable manner (e.g. if the visiting personnel are staying over lunch or overnight, it would be reasonable and hospitable for personnel of the host organisation to take the personnel of the visiting organisation out to a reasonably priced lunch or dinner).
Hospitality may also include expenses ancillary to business meetings. For example, an organisation may wish to pay for a taxi or provide a company car for client personnel to travel to the airport, or to provide accommodation for client personnel that are visiting the organisation.
Hospitality could be considered to be a bribe if it is given or received with the intention of influencing someone to act improperly, or as a reward for having acted improperly.
Critics of the wide-spread international move to control business expenditure on hospitality from an anti-corruption perspective argue that these controls will result in business hospitality being abolished. This is simply not true. Firstly, hospitality can occur if there is no corrupt intent and no perception of corrupt intent. Secondly, in the case of any doubt, it is always open to the employers of participants in the hospitality to pay the expenses of their own employees. The primary reason for these controls is to prevent an organisation improperly influencing a person by paying for that person’s hospitality.
(2.2) What types of hospitality are not likely to be regarded as corrupt?
Hospitality which is not likely to be regarded as corrupt includes:
- An organisation providing and paying for coffee, tea, soft drinks, biscuits and sandwiches for its own personnel and the personnel of another organisation(s) during a meeting.
- An organisation paying for its own personnel and the personnel of another organisation(s) to have a business lunch or dinner at a restaurant which provides a reasonable but not extravagant meal, and with a reasonable, but not extravagant level of alcohol.
- An organisation paying for its own personnel and the personnel of another organisation(s) to attend a project commencement or completion ceremony, with a reasonable, but not extravagant level of food and alcohol being provided.
(2.3) What types of hospitality are more likely to be regarded as corrupt?
Hospitality which is more likely to be regarded as corrupt includes:
- Meals or drinks at very expensive restaurants or bars.
- Over frequent hospitality: For example, weekly meals at a restaurant.
- Hospitality for family members. For example, a quality inspector is responsible for approving an equipment supplier’s work on-site. The equipment supplier invites the supervisor to come to inspect the supplier’s factory. The supplier pays the hotels and meals for the supervisor and members of the supervisor’s family.
(3.1) What is entertainment?
Entertainment is the provision of an external event which can pleasurably occupy a person. For example, a sporting event, the theatre, a nightclub.
It is doubtful that entertainment can justifiably be regarded as a necessary and ancillary part of a business meeting or relationship. This does not make it necessarily corrupt. However, the risk of entertainment in a business context being perceived to be corrupt is higher than in relation to hospitality due to the lack of a necessary connection between the entertainment and the business (i.e. people need to eat, drink and sleep when on business – they do not need to be entertained).
Entertainment could be considered to be a bribe if it is given or received with the intention of influencing someone to act improperly, or as a reward for having acted improperly.
(3.2) What types of entertainment may sometimes be regarded as corrupt?
Entertainment which may sometimes be regarded as corrupt includes:
- Sporting or cultural events. For example, an organisation paying for its own personnel and the personnel of another organisation(s) to participate in a sporting event (e.g. golf), or to attend a sporting or cultural event (e.g. football match, grand prix, opera). This is a controversial area. Many people disagree on its acceptability in principle. While the stated intention is often for the personnel of different organisations to get to know one another better, the context is personal pleasure in a non-working environment. It is questionable why personnel with a business relationship need to get to know one another in a personal environment rather than in an office meeting or over a business meal. In fact, this could potentially be damaging, as it may be more difficult for a manager with a supervisory role over another person to exercise that role fully objectively if the two people have got to know each other in a personal context. There is a simple solution to this issue so as to remove any suggestion of improper influence by reason of one organisation paying the costs of the personnel of another organisation to attend a social event: if two organisations deem it desirable for their personnel to get to know each other in a social environment, then the event can take place, but each organisation can pay the expenses of attendance of its own personnel.
The more expensive or exclusive the event, the more likely it may be or be perceived to be corrupt.
(3.3) What types of entertainment are more likely to be regarded as corrupt?
Entertainment which is more likely to be regarded as corrupt includes:
- Entertainment at night clubs.
- Provision of sexual favours.
- Over frequent entertainment: For example, a plant hire company is one of several plant hire companies on the contractor’s approved list. The contractor’s project managers have delegated authority from the contractor to place orders with the plant hire companies for the supply of excavators, cranes, generators, and other construction plant. A plant hire company provides a project manager with free weekly tickets to the local football club.
- Extravagant or disproportionate circumstances: For example, the fleet manager of an organisation is responsible for purchasing or leasing all the organisation’s vehicles. A car supplier invites the manager to test drive the car. The test drive could take place near the manager’s office. However, instead, the car supplier pays for the manager to participate in a three day visit to a racing circuit in another country, where the manager not only test drives the car, but is also able to drive various high performance sports cars.
- Entertainment for family members. For example, a sub-contractor providing tickets for a sporting event to a contractor’s project manager and his family.
(4) Guidelines for gifts, hospitality and entertainment (“GHE”)
(4.1) Total prohibition
To counter the risk of GHE being corrupt, or being perceived to be corrupt, an organisation may totally prohibit the offer or receipt of GHE in connection with the organisation’s business. For example:
- Some governments prohibit public sector personnel from receiving GHE. In some countries, it is a criminal offence to offer public officials GHE.
- Some organisations prohibit all members of their procurement and project management staff from receiving GHE, and notify their suppliers and sub-contractors not to offer GHE.
(4.2) Partial prohibition
A partial prohibition of GHE is more common than a total prohibition. There is nothing intrinsically wrong with an organisation or individual giving or receiving GHE, as long as these are not intended to be corrupt, and cannot be perceived to be corrupt. GHE is regarded by many as a legitimate, important and enjoyable part of business and are essential in many cultures.
Some organisations may for example permit reasonable hospitality, but prohibit gifts and/or entertainment.
(4.3) Controls and factors
The organisation should implement effective controls over GHE, so as to minimise the risk that they could be corruptly given, or be perceived to be corruptly given.
The following are recommended controls, and some factors to be taken into account in implementing these controls.
(1) State the restriction in the policy
If any one or more of gifts, hospitality and/or entertainment is wholly or partially restricted or prohibited by the organisation, or by law, then state the restriction or prohibition in the organisation’s policy.
(2) Consider the intention behind the GHE
The intention behind the GHE should always be considered. If it could be intended to influence someone to act improperly, it should not be offered or accepted.
(3) Consider the perception
Do not give GHE if it could reasonably be perceived to be corrupt. There are two common perception tests:
- Newspaper test”. Would a newspaper be likely to report the GHE, and, if a newspaper did report, what would the public perception be? For example, a bottle of whisky given at Christmas would be unlikely to be reported or to give rise to an adverse impression. On the other hand, an all-expenses paid golfing week-end prior to a tender evaluation would almost certainly give rise to an adverse impression if reported.
- “Prosecutor test”. If the GHE did lead to a corrupt outcome, with the result that a prosecution takes place, how would you explain the GHE in court to a prosecutor? Would your explanation be plausible to the judge or jury?
(4) Consider the legal and regulatory environment
Before giving any GHE, ensure that the law of the territory, and the regulations of the recipient’s employer, allow such GHE to be received by that person. Some countries for example prohibit any public officials from receiving GHE. Some organisations prohibit their personnel from receiving GHE.
(5) Impose a maximum value of GHE which can be given or received
- While it is possible to leave GHE values to the discretion of personnel (particularly more senior personnel), it is normally easier both from an organisational control perspective and from the personnel’s perspective, for limits to be imposed.
- The maximum value of GHE should be low enough that it would be highly unlikely to influence anyone to behave improperly, and would be highly unlikely to be perceived by a third party (e.g. the media or prosecuting authorities) to have any influence.
- This maximum value may vary according to the territory (as in wealthier countries a gift worth e.g. $25 may have a lower relative value than the same gift in a less wealthy country).
- This maximum value may also vary according to the wealth of the recipient (as for a wealthy recipient, a gift worth e.g. $25 has a lower relative value than the same gift to a less wealthy recipient).
- Differentiate if necessary between different values applicable to gifts, hospitality and entertainment.
- Differentiate if necessary between different values which personnel may give or receive. For example, the organisation may wish to put lower limits on what its personnel can receive than what they can give. However, it is probably more usual for the giving and receiving values to be the same.
- As it can be difficult to determine and administer all the above possible variations between territory, wealth, etc. it is probably simpler for an organisation to impose a suitable low blanket maximum (e.g. $25 for gifts and $75 per person for hospitality and entertainment), and only permit the maximum to be exceeded in exceptional circumstances with the approval of e.g. the compliance manager.
(6) Impose a limit on frequency of GHE to the same recipient
A weekly gift worth $25, or weekly meals, can soon accumulate to a large amount. So a suitable periodic value limit (e.g. annual) can be imposed on GHE to the same recipient.
(7) Prohibit or limit cash gifts
While both cash and non-cash assets can be bribes, a cash gift is more likely to be regarded as an attempt to influence someone than a gift which cannot easily be converted into cash. It is therefore preferable to prohibit cash gifts. However, some organisations work in locations where a small customary and non-corrupt cash gift may be necessary (see above for examples), in which case, suitable controls need to be imposed by the organisation.
(8) Be cautious about any GHE given to a person in a position to award contracts or approve permits, certificates or payments
GHE given to, or received by, a person in such a position of influence is more likely to be regarded as a bribe than if it was given to or received by a person with no relevant decision making power.
(9) Be cautious about GHE at times when it could be seen to be an attempt to influence an outcome
GHE given to someone who is about to make a decision which could favour your organisation, or who has just made a decision in favour of your organisation, is more likely to be seen as an attempt to influence, or as a reward to, that person than if it was given at a time when no decision is pending or recent.
(10) If gifts need to be given, then as far as possible give company branded gifts of limited re-sale value
A paperweight, pen, framed photograph, or a miniature of the company’s product, or something similar, with the company’s brand or logo on it can provide an effective memento without having any real re-sale value. This is less likely to be regarded as corrupt than a product with a resale value.
(11) Consider requiring all gifts received to be donated to charity
Consider requiring all gifts received by the organisations’ personnel to be handed into a designated manager at the organisation, who will then donate them to a charity selected by the organisation which has no connection with the organisation’s business. This can limit the risk of a manager being corruptly influenced by a gift, as the manager cannot retain it. There can be exceptions to this rule, e.g. for low value company branded mementos which the personnel can be permitted to keep.
(12) Require GHE given or received to be appropriately recorded
Recording GHE in a Benefits Register can be an important control against potentially corrupt GHE for the following reasons:
- If personnel know that they need to record the GHE given or received, they are likely to be more cautious about the circumstances and value.
- The register can be inspected by the compliance manager, line managers, internal audit etc. who can identify any concerning trends (e.g. a procurement manager receiving over frequent GHE from suppliers, or a sales manager providing over-generous GHE to a client manager).
- It should be a disciplinary offence for personnel not to record. Therefore, if for example a procurement manager fails to record frequent GHE from suppliers, but denies any corrupt intent, the manager can be disciplined for the failure to record, even in the absence of proof of corrupt intent.
- Some organisations have a GHE register in which all GHE, of whatever value, both given and received, must be recorded. However, for many organisations, GHE given has to go through the personnel expenses record or other accounting control, and so will in any event be recorded in this section of the accounts. If this is the case, and these records can be easily located and checked (e.g. by the compliance manager or internal audit), then the organisation does not need to have a duplicate system (both an expense recording system and a GHE given recording system). The organisation’s expense recording system can play both roles.
- So as to prevent over-burdensome recording, the organisation could allow a de minimis recording exception; i.e. that personnel do not have to record very minor GHE, such as:
- coffee, tea, sandwiches and other light refreshments during a business meeting (whether provided at the venue or at a nearby snack bar / coffee shop);
- branded company gifts or mementos of negligible value (e.g. USB sticks, pens, calendars, meeting photographs).
(13) Consider allowing deviations to the above rules in legal and exceptional circumstances
Consider allowing deviations to the above rules in exceptional circumstances, but only if legal and approved by the compliance manager. A GHE policy with stated financial limits cannot expect to cope with all potential circumstances. There may be exceptional non-corrupt circumstances where a deviation to this policy is required. In this case, approval should be sought for the deviation in advance from the compliance manager (and, if appropriate from an additional senior manager). The reasons for the request and the approval should be documented, and the compliance manager must be satisfied that the GHE is appropriate, and is not corrupt, and could not reasonably be perceived to be corrupt. Where a manager with the power to approve a deviation will be the giver or beneficiary, the manager should ensure that another senior manager approves the deviation.