It’s the holiday season, and your company’s purchasing manager receives a bottle of wine from a longtime vendor. You might think, “No problem, it’s just a wine bottle.” A week later, we find out it was actually a very rare bottle worth over $1,000. Now you may have a problem. Your company’s policy on this issue is not clear, but gifts, whether a conflict of interest or a bribe, are exactly what can give the impression of fraud. How can you prevent this from happening again? By having a gifts and entertainment (G&E) policy. Here, we outline the needs of businesses, especially during this time, and five things their policies should address.
Gift and Entertainment Policy: Basic Overview
A G&E policy can help prevent the above situations from occurring and demonstrate a company’s commitment to conducting business ethically and with integrity. Although an effective G&E policy will not address every possible situation, a well-developed policy will promote consistency, promote ethical business relationships, and minimize potential concerns. You can provide guidance to your employees and business partners alike.
Who is covered by this insurance?
The policy must be applied by all Employees – from the entry-level employee at the bottom of the corporate ladder all the way to the CEO. It’s not uncommon for senior executives to receive gifts from business partners at any time of the year, but especially during the holidays. When top executives are allowed to accept gifts and entertainment that exceed company limits, it sends a message that ethical standards apply to all employees except executives. This can damage morale and lead employees to believe it’s acceptable to violate other company standards.
In some cases, executives and other employees may be invited to official events that go beyond entertainment. This is generally permissible as long as the event is deemed commercially reasonable and the individual is representing a company. However, please note that in some countries, such entertainment may violate local anti-bribery laws and may be considered a violation of U.S. federal law. Therefore, it is important that such events are approved in advance by your company’s legal or compliance group.
5 Things Your G&E Policy Should Address
1. Gift and Entertainment Dollar Limits
Gifts are generally considered to be of value, and entertainment usually includes events such as dinners, sporting events, and performances. It’s not uncommon for gifts to have limits of $50 to $100 and entertainment to have limits of $100 to $200. If you do business outside of the United States, your policy should also explain that these limits are equivalent to U.S. limits, as they must be adjusted based on the local cost of living. Some policies may not impose monetary limits on entertainment, but may state that entertainment must be consistent with general ethical business practices. An effective policy should also have annual limits to prevent repeat occurrences that fall under one-time limits. Additionally, gifts of cash or cash equivalents such as gift cards (of any amount) should be strictly prohibited.
2. Family
The policy should specify that similar restrictions apply to gifts and entertainment to family members of the business entity.
3. Timing of gifts and entertainment
The policy should prohibit receiving gifts or entertainment during certain periods. For example, employees may not accept gifts or entertainment from business partners or potential business partners during bidding processes, contract negotiations, vendor evaluations, or formal reviews. Employees need to be trained to avoid the appearance of dishonesty, so that the offer or acceptance of gifts or entertainment is not dependent on either party doing or promising something in return. There’s no question about it.
4. Specific circumstances
A policy should cover some specific situations that often raise questions.
- To give to a colleague: The policy should also address guidelines regarding gifts and entertainment by fellow employees. First, employees should check and follow the recipient’s company policies. This may include limits on amount and timing, as well as the customary business practices of the recipient. In the absence of company guidelines regarding specific recipients, gifts and entertainment provided by company employees should be consistent with employees’ expectations for gifts they receive.
- When giving to a government official: Gifts and entertainment provided to public officials are usually highly regulated. This policy requires prior approval by a member of the Legal or Compliance department before providing gifts or entertainment to public officials. Additionally, your company must carefully record such gifts to ensure compliance with any applicable reporting obligations. Don’t offer gifts or entertainment in exchange for government actions or approvals, such as building permits, favorable tax assessments, or other government actions.
- If the gift is given to a foreign public official: Gifts and entertainment provided to foreign officials are regulated by the Foreign Corrupt Practices Act, and violations of the Act can result in significant penalties. Prior approval from the legal or compliance department should be included as a mandatory clause in the policy. See below for more information. Deal for a Lifetime – Or Jail and Fines? 5 Best Practices to Avoid Foreign Corrupt Practices Act Violations.
5. How to respond to questions
The policy should provide contact information and resources for employees if they have questions regarding compliance with the G&E policy. The policy should also encourage employees to seek guidance if they have questions about accepting gifts or entertainment.
summary
A few final points:
- This policy should be included in your compliance and ethics policy or company handbook.
- Include a policy summary in new employee orientation programs and any type of onboarding for new company agents or representatives who are not employees.
- It’s also a good practice to send a reminder to your business partners about your company’s G&E policy annually (i.e. during holidays) and ask for their cooperation.
- Some companies may also use this opportunity to remind business partners of their commitment to ethics and integrity in all corporate dealings.
conclusion
This break provides a great opportunity to strengthen and strengthen your business ethics and compliance policies and programs. If you have any questions about best practices for addressing compliance issues, please contact Fisher, his Phillips attorney, the author of this insight, or an attorney in our Corporate Compliance and Governance practice group. To get the latest information on this and other employment topics straight to your inbox, make sure you’re subscribed to Fisher Phillips’ Insight system.
