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Business Gratuities Article Cep 0611 Burke (1)

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Business Gratuities Article Cep 0611 Burke (1)

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Describes the balancing act a business or organization faces when building
and reinforcing relationships for business and revenue
goals with legal and
ethical behavior. Suggests considerations and methods to handle business courtesy requests.

Describes the balancing act a business or organization faces when building
and reinforcing relationships for business and revenue
goals with legal and
ethical behavior. Suggests considerations and methods to handle business courtesy requests.

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Business Gratuities Article Cep 0611 Burke (1)

  1. 1. Compliance & Ethics Professional Vol. 8 / No. 3 06 / 2011 A publicAtion of the Society of corporAte compliAnce And ethicS Top sTories inside 4 The Compliance Covenant: More pull, less push 8 Is your chief watchdog an esquire? 12 The compliance risk of compliant behavior 18 Business gratuities: Sometimes it’s better not to give or receive 22 Managing ethics upwards 30 Third-party risk management: Properly managing compliance of outsourced relationships 36 Global Compliance: Thailand 46 The FAR raises the bar for ethics and compliance programs 52 Culture and values: Meet Laurie Gallagher “Adequate procedures” Director, Healthcare Compliance Training under the UK Bribery Act at Amgen This article, published in Compliance & Ethics Professional, appears here with permission from the Society of Corporate Compliance & Ethics. Call SCCE at +1 952 277-4977 or 888/277-4977 with all reprint requests.
  2. 2. Business gratuities: Sometimes it’s better not to give or receive by laurel l. burke, cceP Routinely, a business orga- government personnel, discusses nization must balance building where to find rules and how and reinforcing relationships to evaluate business courtesy with business needs and revenue requests, and finally suggests a goals in the context of legal and sample checklist of items to assess ethical behavior. And, people in for specific organizational courtesy business often believe building requests. relationships and securing their positions requires providing gifts Policy considerations and hospitality to their commer- Why should an organization cial counterparts.1 care about the business courtesies Certainly, ethical businesses provided to and by its personnel? seek to compete and win busi- Organizations that mishandle lauRel l. buRKe ness fairly—without using illegal business courtesies are at risk of or unethical practices to gain being barred from future business Inside an organization, every advantages. However, sometimes up to and potentially including employee (or their business unit organizational sales personnel, criminal charges for individuals. lawyer)—whether they sit in public policy staff, lobbyists, and The Foreign Corrupt Practices procurement or sales, policy or others regard business courtesies or Act (FCPA), federal government, regulatory areas, technical, or gratuities as a “cost of doing busi- and state and local agencies pro- somewhere else—should make ness” or something that “everyone hibit bribery and illegal payments. an assessment of the state, local, else” is doing and are too lax about But, exceptions inserted in many and agency specific rules that checking when a gift or hospital- rules, such as the “reasonable regulate gifts before taking some- ity is unethical or unacceptable and bona fide expenditures” of one to lunch or dinner, buying or or prohibited. To help ensure an the FCPA, make the distinction providing game tickets, or even organizational culture in which between prohibited payments and treating someone to coffee. The personnel do not succumb to an permitted expenditures less clear evaluation can be confused by unethical mentality of getting and more subjective. Additionally, existing relationships when, for the revenue no matter what the organizations employing a lobbyist instance, a conscientious employee cost, organizations must provide or involved in procurement may asks the organization if he/she can clear direction and oversight to face different rules that may apply invite a public employee who is his employees and executives. This to others beyond the individuals neighbor over for dinner because article provides some recommen- performing those tasks, and have they periodically socialize in the dations regarding organizational additional reporting requirements neighborhood. If the neighbor policy considerations for public/ for the lobbyist or organization. has input on a pending agency 18 compliAnce & ethicS profeSSionAl June 2011 www.corporatecompliance.org
  3. 3. decision to purchase services from outside the bright–line of pure agencies may issue more guidance the organization but the employee bribery, the stringency and acces- still. For example, the Utah Pro- is far removed from the transac- sibility of the requirements vary curement Code2 makes it a felony tion, the organization may not be widely. to accept or offer any emolument, concerned. But, if the employee gratuity, contribution, etc., if the happens to be the director who Where to find rules and recipient is or is acting as a pro- pitched the services to the neigh- requirements curement officer. Utah’s Uintah bor’s agency, the organization may At their essence, gift rules School District Purchasing Policy want to consider the event more intend to protect integrity and 004.0200 (adopting 63G-6-1002 closely and determine if action is encourage ethical conduct. Imple- with guidelines) and the Depart- required, and possibly make sug- mentation and content vary widely. ment of Administrative Services gestions about what the public Where to find the rules also varies Internal Policy on Gratuities, employee would be permitted to widely (e.g., state statutes, munici- Gifts and Solicitations, published accept. pal codes, ethics codes, lobbying July 21, 2008, provide guidance If the organization chooses requirements, procurement guide- where there may be a conflict of to allow gifts and entertainment lines, company codes of conduct, interest with the objective to “pre- of some type, it should provide and industry “best practices” clude impropriety” and indicate a system that supports the deci- adopted by a company; and for the requirements of the law do not sion, ensures the rules used are those with federal relationships, apply to occasional non-pecuniary the most up-to-date, and that the the FCPA, Anti-kickback Statute, gifts with a value not exceed- requests are not reviewed in isola- Anti-lobbying Act, Procurement ing $50, unless the employee is tion. On the isolation point, the Integrity Act, and others). involved in a procurement or other system should have mechanisms In addition to standard statute governmental action affecting the to consider what else is happen- and ordinance searches within the donor.3 ing with the proposed recipient as rules for lobbying, procurement, Or, a state may provide a sig- well as the department or agency and gifts, you can perform web nificant amount of guidance so and the organization; for instance, searches on agency/local sites. that the bulk of the municipali- is there a procurement or other Looking for policies, codes of con- ties and agencies within the state contract pending or proposed leg- duct, ethics codes, or terms such choose to adopt the state rules, islation being considered, or will a as gifts, gratuities, lunch, dinner, even if they issue their own codes commission be acting? Even if an conflict of interest, entertainment, of conduct. So, where do you start? organization chooses not to review pecuniary/non-pecuniary, and • Identify the applicable rules to every business courtesy proposed hospitality are likely to provide analyze. If the proposed recipi- for public employees or officials, it more depth and understanding of ent is a municipal employee or should provide internal guidance what a particular agency intends. official, start with the state stat- in company policies and proce- Searches may reveal that a state’s utes, but don’t stop there. Take a dures and set limits that employees set of rules are vague, contradic- look at the city’s ordinances and can easily find, understand, and tory, or silent but, because of its ethics or business codes, as well implement. own experience or leadership, as the website for the specific Careful attention to the specif- a city or county in that state department or agency. ics and some oversight serves an decided to publish guidance on organization well, because once what’s acceptable. City and county continued on page 20 www.corporatecompliance.org June 2011 compliAnce & ethicS profeSSionAl 19
  4. 4. Business gratuities: Sometimes it’s better not to give or receive continued from page 19 • Look for opinions from ethics policies for different people. the gift falls within the permit- boards and the attorney gen- For instance, a school district ted parameters, the recipient eral. Opinions are at least employee may not be permit- usually may accept. persuasive materials. Be sure to ted to attend certain events for check the statutory definitions free, but the superintendent of Gift rules cast a wide net for who qualifies as a lobbyist, the same school district may, in and come in a variety of forms which vary widely jurisdiction certain circumstances, be per- (see example on page 21). Focus- to jurisdiction. Even registered mitted to attend the event at no ing on the type of recipient first lobbyists are surprised by the or little personal cost. and acting with prudence when it breadth of the plain language. • Determine the definition of comes to providing a courtesy help • Search procurement guide- “gift.” Some rules define the steer the organization to the right lines for the agency. Look at parameters of a gift rather than side of giving and receiving. what’s discussed in any appli- providing a definition per se, yet Organizations that have cable contract or Request for choose to exclude items from the employees who interact with Proposal or Quote (RFP/Q) definition of a gift such that a public employees should create a documents. Dig in to determine prohibition in practice becomes mechanism for those employees if there are policies that have more lenient. For instance, to ensure they provide business been issued that address the spe- items of “nominal” value may gratuities only when allowed by cific situation or an analogous be excluded from an otherwise company policy and within the one. One agency may permit a outright prohibition on accept- rules that apply to the intended round of golf with the business ing gifts, and therefore, the recipient. Scrutinize the reasons contact, while another prohib- intended recipient may actually for providing a courtesy and its entertainment of any sort. accept the item. Even the term ensure that no impropriety could Consider that one department “nominal” can mean different be inferred or attributed to the might exclude food from what things in different states or be organization from its employee is defined as entertainment or of “unexceptional value” rather behavior.  a gift, but some others might than of nominal value. In the Notes: apply a dollar limit on the food most extreme rules, all gifts are 1 See e.g. Gratuities, gifts and the ethical business relationship, by that may be consumed with the bribes and impose criminal pen- Simon Longstaff. Available at http:// business contact. alties for violations on either the www.ethics.org.au/ethics-articles/ • Once the applicable set of recipient or the giver or both.4 gratuities-gifts-and-ethical-business- relationship). rules has been determined, More typically though, rules 2 Utah Code Ann. § 63G-6-1001 & consider the recipient. Look look to what the giver intends 1002 at not only where the recipi- to get as a result of providing the 3 See for example, The City and County of Denver Charter and ent works, but also whether the gift. If the giver intends to gain Code of Ethics found in Article IV recipient is employed, elected, an advantage or buy his or her of the Denver Revised Municipal Code and Denver Public Schools appointed, or volunteering. way into a contract opportunity, Policies. Available at http://www. What authority does the recipi- for example, the recipient would dpsk12.org/policies/. 4 See e.g., Utah Code Ann.§ 63G-6- ent exercise? Officials, directors/ not be permitted to accept the 1001 & 1002. trustees and employees may be offered items. But, if the giver subject to different require- has no such devious or under- ments, so look for different handed intent, and the value of 20 compliAnce & ethicS profeSSionAl June 2011 www.corporatecompliance.org
  5. 5. Business Gratuities Checklist What gift/gratuity/entertainment is proposed? (Some things, but not the only things, to con- • Value sider when evaluating a business courtesy/gratuity − “Nominal” request internally.) − More than nominal • Food (breakfast, lunch, dinner, coffee) Who is the recipient? • Entertainment (giver will attend) • Public employee (employed by federal, city, state, • Cash or cash equivalent (gift card) agency, department) • Tickets (giver will not attend) • Public official (elected or appointed) • Donation • Person who has influence on decision makers • Decision maker for pending contracts or requests Where is the agency/department (jurisdictions) for proposals or quotes (RFPs/RFQs) • State/federal rules • Authority for agency/department • Local ordinances • Policy statements Who is the “giver”?” • Code of conduct, ethics codes • Lobbying employer • Procurement rules/Guidance • Lobbyist providing courtesy When will the gift be given? What are the rules? • Legislature in session • Lobbying rules: By offering courtesy, does organi- • RFP/RFQ pending zation need to report it a certain way? • Contract negotiations in progress • Does policy permit gratuity/entertainment of this value? Why or what is the reason for the courtesy? • Does policy permit gratuity/entertainment to • Influence recipient this type of recipient, given the present business • Get something in exchange for the gift climate? • Relationship separate from business Editor’s note: Laurel L. Burke is an Attorney with CenturyLink, Compliance & Ethics Professional a Fortune 500 telecommuni- AdvErTISInG rATES cations company in Denver, PeR InSeRtIOn Colorado. During her 11½ Full-page full-color (back cover, inside 1/2-page black-and-white: back cover, or inside front cover): years with the company, she 1–2 .................... $630 1...................... $1,725 3.......................... $535 has advised business units 3...................... $1,575 4.......................... $455 regarding compliance, regu- 4–6 ............... $1,500 1/4-page black-and-white: latory, policy, and commercial Full-page black-and-white: 1–2 .................... $375 1–2 .................... $905 3.......................... $335 contract matters and guided 3.......................... $735 4.......................... $320 public policy. She can be 4.......................... $605 contacted at laurel.l.burke@ two-color ads are available (black and pmS 5115 c) for an additional charge gmail.com. of $435 per insertion. www.corporatecompliance.org June 2011 compliAnce & ethicS profeSSionAl 21

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