The Ethical Dilemma in Business Gifts: Giving or Bribery?

Sports events, entertainment and gifts have always been used to leverage business relationships, says Karl Smith, founder of Business Networking South Africa. The premise of giving gifts is an ancient way to express gratitude, appreciation and love. Giving in itself is fairly innocuous and it is based upon the philosophy of reciprocity which is commonly articulated by phrases such as “what goes around comes around” or “what you sow, you will reap”. While gifts are often given as a gesture of goodwill, overly generous business gifts tend to put pressure on the recipient to extend more than just goodwill to the giver. Thus, not surprisingly, the line between sincere giving and bribery is becoming increasingly distorted.

The topic of bribery has a long history, and bribery seems to be an arena in which our moral views are changing. John T. Noonan, a lawyer and historian of moral ideas, traces the history of thought on bribery from 3000 B.C. to the present. He finds that moral concepts change: “Moral concepts found enshrined in traditions do not stay the same. They undergo transformation. They are subject to investigation and criticism. They expand, shrink or disappear.” Bribery is increasingly viewed with intolerance throughout the world. In fact, in virtually every country in the world bribery is a shameful act. Those who accept bribes do not speak publicly of their bribes anywhere.

Gifts, even those of nominal value, can create the perception of undue influence. So what are gifts and bribes? Defining gifts and bribes may seem like a simple-minded activity, but, try posing the question another way and you will see why this is an important issue in business and professional ethics: What is the difference between a gift and a bribe? A gift is something of value given without the expectation of return; a bribe is the same thing given in the hope of influence or benefit. Gifts and bribes can be monetary, actual items or they can be tickets to a sporting event, entertainment, travel, rounds of golf or restaurant meals.

Even if we agree that giving to bribe or coerce someone into influencing a decision or outcome is wrong, it is increasingly difficult to decide where to draw the line between permissible and impermissible actions. Sometimes accepting these gifts and amenities may be a proper part of a business relationship. In some situations, however, accepting them may be a serious breach of business and professional ethics, and perhaps even a violation of the law.

Policies and practices on handling gifts and invitations to special events vary from company to company. For some the potential harm to an organisation’s credibility is not worth the risk and they ban all gifts to employees, excluding personal gifts from friends and family. Other organisations accept gifts, but when received, donate them to a non-profit organisation. Then there are some organisations where gifts received must be declared and it is maintained in registers. In other organisations, unsolicited gifts are shared with all employees. If everyone benefits equally, it may lessen the perception that the gift was intended to influence the action of a single employee.

Clearly, it is unethical and in some instances illegal to accept gifts or invitations to any event where the intent is to buy favour. Recognizing that business is often conducted at social events and paying your own way to attend an event is not always feasible, some individuals do accept invitations to social events when the overall purpose is to further the company’s interests. Others attend only those business-related social functions when they or their company or local office can pay for the cost of attendance because it is in the interest of maintaining good business relationships to participate.

South Africa has gone a long way to address the distorted line between corporate giving and bribery. To this end, the Prevention and Combating of Corrupt Activities Act 12 of 2004 came into effect and replaced the Corruption Act of 1992. The Act extends its application from the offices of corrupt public officials to the private sector and other entities. The Act clearly criminalises specific “gratification” including the demanding of, agreeing to or the offering of monetary and non-monetary gifts. Failure to report corrupt activities carries a maximum penalty of 10 years’ imprisonment.

The following questions may serve as guidance in considering your company’s approach to the subject:

· Does your company have a code of conduct or policy on gifts and attendance at work-related social events to guide employees? Is it clear and appropriate?

  • Does the code of conduct or policy follow international and South African best practice, and has it been drafted with a clear understanding of the Prevention and Combating of Corrupt Activities Act 12 of 2004?
  • Are there other ways to acknowledge the worth of employees without subjecting them to potentially embarrassing headlines?
  • Will your attendance at an event be viewed favourably by your colleagues, other vendors, stakeholders, shareholders of the company or general public?
  • Is the gift you or your employee may accept worth the headline that it may generate?
  • Does your company have a training or awareness or mentoring programme to equip staff at all levels with an inside-out approach to ethics, based on values and principles? An inside-out approach will help staff to debate and understand the importance of ethical behaviour from a personal and organisational perspective.

The giving of gifts or doing favours to influence outcomes and without transparency of your intent ultimately undermines trust in business relationships – whether it is in your company or outside, says Smith. If you are the gift-giver, find out what gift-giving policies your target companies have. When dealing with organisations from different countries, find out what their gift-giving customs are. Find out what it is that they would appreciate and value and what might be offensive. You will show that a lot of thought went into the gift. Gifts that would remind the recipient of your country would be valued. Find out what it says in the code of ethics of your target organisation or profession.

There are codes of ethics for auditors, accountants, doctors, lawyers, government officials, pharmaceutical companies, journalists and most other professions. You will avoid embarrassment and unnecessary expense by researching what these are. You work hard to establish credibility and trust among your colleagues, the other businesses with whom you do business, and most importantly – with your shareholders. Credibility and trust in the practices of your business are built around accountability and appearances. If accepting a gift or attending an event at some else’s largess undermines your credibility or creates the appearance of impropriety, don’t do it!

Copyright 2010 by Karl Smith

This article may be copied or republished with the following credit:
“By Karl Smith, founder of Business Networking South Africa and author of Beyond The Business Handshake: Dare To Build High-Trust Business Relationships, Cape Town, South Africa.

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