Employers can be held liable for their employees’ actions around gifting, so it’s important to know where the ethical boundaries lie, writes David Browne.
The recent controversy surrounding the prime minister and his wife accepting gifts of clothes and concert tickets has reignited discussions about the rules and ethical boundaries of handouts.
While words like ‘bribery’ and ‘corruption’ evoke images of global corporations lobbying governments, it actually touches businesses of all sectors and sizes.
Liable for their employees’ actions, it’s crucial that employers have the right policies and procedures in place to prevent bribery or they run the risk of huge financial, reputational and even criminal repercussions.
Bribery Act 2010
The Bribery Act 2010 criminalises four offences: the act of bribing someone, the act of being bribed, the bribing of foreign public officials and the failure to prevent bribery by associated persons.
The latter offence is what makes organisations liable for the actions of their employees, with businesses potentially liable for not having sufficient safeguards in place to prevent acts of bribery from occurring; an offence attracting the risk of an unlimited fine.
While the Act is clear in broad terms about what constitutes bribery, it is still easy to fall foul of the legislation.
For example, it covers offences committed abroad as well as in the UK, so trading in other countries where ‘facilitation payments’ are a cultural norm, can be difficult to navigate.
Employers must therefore have oversight of their employees’ actions at all times, and steps must be taken to ensure clear, accurate and up-to-date records of all financial transactions to ensure transparency.
Associated persons
The Act makes businesses not just liable for their employees seeking to bribe others but broadens this definition to include any ‘associated persons’.
This means someone who performs services on their behalf, which could include consultants, contractors, freelancers or agents.
Employers must therefore do their due diligence when deciding which external partners to work with, for example conducting thorough background checks, reviewing relevant documents and asking for references where appropriate.
However, just because an employee is found guilty of bribery, it does not mean that their employer will also be charged.
Businesses that can prove they have robust policies and adequate procedures in place to prevent and deter bribery and corruption can be exonerated in court or escape prosecution entirely.
Training and understanding
This protection relies on having more than just a policy sitting on a shelf gathering dust. Employees need to not just be aware of the policy but fully understand it.
This may require, for example, regular training that uses relevant examples of what bribery and corruption could look like, specific to industries and job roles.
It’s also crucial employees understand the consequences of not following this policy, including potentially being dismissed from the company, as well as risking a financial penalty, criminal conviction or even a prison sentence.
These sessions and those who attended will also need to be properly recorded in order to form a key part of the defence in a bribery investigation.
A zero-tolerance policy towards bribery offences that is consistently applied to all employees is crucial in demonstrating a business’ commitment to anti-corruption.
The senior leadership team should set a clear, positive example by demonstrating a culture of transparency that will trickle down to the junior employees and permeate the company culture at large.
What about corporate hospitality?
Businesses should also consider their approach when it comes to corporate hospitality. A key tool for building and maintaining relationships with clients, customers and stakeholders; the government was clear when the Act was introduced it was not intended to put an end to corporate hospitality altogether, but instead ensure that it could not be used as a guise for illegal activity.
Bribery is defined under the Act as something seeking to induce, or actually inducing, ‘improper performance’: in other words, incentivising or influencing someone’s decision-making or behaviour.
Therefore, when a business decides to give a gift, the intention behind it should be made clear from the start to ensure there’s no ‘quid pro quo’ expectation.
Even where the reasoning is clear, optics and timing should still be considered. For example, it may be a standard practice to always send clients a gift on their birthday.
A business in a sector where gift-giving is more unusual is far more likely to be investigated, even if the value of the gift is lesser.”
However, if the business is in the middle of a tender process with the client at the time, then this could be misconstrued – regardless of intention or past expectation.
It is also important that businesses are mindful of how a gift could be perceived.
Industry norms
Although bribes are often seen as particularly lavish or expensive, to ensure that businesses in sectors where gift-giving is far more common, like hospitality, leisure or entertainment, aren’t unfairly scrutinised, the industry norms for corporate hospitality are taken into account.
A business in a sector where gift-giving is more unusual is far more likely to be investigated, even if the value of the gift is lesser, than a business which does so frequently.
Suspicious timing or optics of the gift are far more likely to raise a red flag than simply being a business that is generous to its customers, clients or stakeholders.
Any business who engages in gift-giving or corporate hospitality on any scale should remain vigilant and always exercise caution.
The thought of bribery and corruption occurring may feel far-fetched to most business owners, but it does happen.
The law is clear: businesses cannot rely on the adequate procedures defence by retrospectively putting policies in place as legal protection when an employee is found guilty.
The only adequate defence is proactive prevention and an established culture of anti-corruption. Implementing clear policies now could save businesses from huge financial and reputational damage in the future.
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