Corrupt Hospitality

Corruption has been the subject and inspiration of many dramas, but in reality it is a serious national and international phenomenon – and there is a growing resolve to combat it. This is reflected at home by the publication this year of a report and Bill by the Law Commission, in which reform and modernisation of offences contained in the Prevention of Corruption Acts 1889 to 1916 and the common law offence of bribery are proposed.

The dates, of course, say it all – the law is more than 100 years old and urgently needs updating. Corporate hospitality plays a large part in late 20th-century business life. Like any other exercise, it is open to abuse. More commonly, however, corporate entertaining plays a vital role in the marketing mix, providing an opportunity for suppliers to see clients in a relaxed, non-working environment.

According to documents issued by the Law Commission, the proposed new offences would involve replacing the existing law of bribery with a modern statute creating four breaches of law:

corruptly conferring, or offering, or agreeing to confer an advantage;

corruptly obtaining, soliciting or agreeing to obtain an advantage;

corrupt performance by an agent of his or her functions as an agent;

receipt by an agent of a benefit which consists of, or is derived from an advantage, which the agent knows or believes to have been corruptly obtained.

An “agent” is anyone who has agreed to perform functions for another party.

However, according to Law Commissioner Stephen Silber QC: “We started with the view that an advantage is conferred corruptly if it is intended to influence an agent. We realised, however, that a definition in these terms was too broad because it would – wrongly – include, for example, all corporate hospitality.”

So the commission has sought to differentiate between acceptable and unacceptable corporate entertaining by looking at the intentions and expectations of those providing the hospitality. It recommends that a person who confers an advantage should be regarded as doing so corruptly if he or she intends that an agent should do (or omit to do) something. “If the agent so acts, it would probably be primarily in return for the advantage, rather than for some legitimate reason”.

Awarding a contract in return for a day out or a weekend in Paris may not seem especially corrupt, but according to Chris Hill, marketing director of ACE Corporate Event Management: “If a company is prepared to give another company business on the basis of corporate hospitality, it is fundamentally corrupt. It has nothing to do with the entertaining,” he says.

“It must be clear why the offer is being made and what both parties expect from it. There must be no confusion.” Hill suggests one way of doing this is to take the decision-making out of the boardroom and tie it more closely into the marketing mix so that it is more in line with the general business objective.

“It makes sense to remove the responsibility from senior people in the company and either give it to the marketing department or employ an outside source so that decisions on whom to entertain and how are made independently,” says Hill. “Corporate entertaining comes into the same bracket as PR. It is another way of presenting the public face of the company.”

One way of ensuring there are no mixed messages in an invitation is to make the objective clear. If, for example, the intention is to educate clients about a product or products so that they buy more, seminars can be built into a day of entertainment. However, straightforward entertaining also has its place. If the elusive managing director of a large client company loves tennis, an invitation to Wimbledon is likely to get him out of the office and the day can be used productively.

But the onus is not solely on those who use corporate entertainment. Those who accept these invitations also have a responsibility to behave with honour. IBM provides strict guidelines to employees on what is acceptable. First, the company offering hospitality must be an existing supplier, so that it is clear that IBM is accepting the invitation to develop the relationship. Accepting an invitation from a new supplier or one trying to forge a relationship with IBM would not be allowable.

“The member of staff must be accompanied by the supplier and entertaining must be limited to cultural and sporting events,” says IBM UK events manager Paul Buxton. “In addition, the occasion should not involve an overnight stay and should be limited in value to $100 (60) a head.”

“We try to maintain ethical standards of behaviour,” says Buxton, who turned down an invitation to the World Cup final this summer. “I decline a lot of invitations that are outside our business conduct guidelines,” he says. Hospitality extended to spouses is also frowned upon because it should be a strictly business-related exercise. If partners are invited, IBM pays for them.

The Home Office would no doubt heartily approve of these honourable objectives. Says Brian Kinney, who works on the Criminal Policy Directorate in the Home Office: “The Government is keen to define unfair advantage, to stop bribery being dressed up as corporate hospitality.

“It may come down to intention,” he says. “Was the intention to focus on good relations or on getting a particular response as a result of conferring advantage? An Interdepartmental Working Group is looking at where to draw the dividing line and how to explain it in legislation. The Home Secretary wants to make an announcement at the turn of the year.”

David Basham, managing director of incentive travel specialists Page & Moy, feels that corporate hospitality is dictated partly by the person being entertained: “Something that might be appropriate for entertaining the managing director of a top 100 plc might be inappropriate for a purchasing manager.”

As a measure for accepting invitations, Basham considers whether or not he would pay to go to the event himself.

“I would pay to go to Wimbledon as a day out, so if someone takes me and gives me lunch, that is corporate entertaining,” he says. “I would never consider accepting something I would not do for myself. I would decline an offer to go to the US Open in Flushing Meadow because it is well beyond what I would pay for.”

Although Basham feels that is a fine but clear dividing line, he thinks it would be impossible to regulate for, particularly as companies’ attitudes to the issue vary so broadly. IBM’s attitude is very different to BAT Industries’, which expects its employees to use their common sense.

Even the term “event” has broad connotations. “In our field, it is a vehicle by which a company can exercise important relationship management. It has to be customer-focused,” says Basham. “It can also be used to create brand awareness through sponsorship, educationals, seminars and conferences – a way of giving people more information. It can also act as a staff incentive.”

Like Hill, Basham feels corporate hospitality should fall in line with a company’s other marketing initiatives. “It is emotive and should be chosen carefully to give the right messages. A loss adjuster, for example, may want to project prudence, stability and heritage, so taking clients bungee jumping says all the wrong things. But a dynamic merchant bank may not be so conservative,” he says.

“Most people are assessing the effect of corporate events expenditure retrospectively,” says Basham. “This leaves it open to misinterpretation. No one would spend 320,000 for an advertisement in The Times and feel they should have to justify it afterwards. Corporate hospitality should be approached in the same way. Decisions should be part of the overall marketing strategy, along with PR.”

A code of high standards is important to underline the intentions of the industry. “The key objective is to ensure that the industry provides what it says it will,” says Eddie Hoare, managing director of Elegant Days. “The products available should be properly used and no money should change hands. Corruption is buying favours – with goods or money. Corporations spending money to provide entertainment for clients should make their objectives clear,” he says.

However fine the perceived dividing line between corporate hospitality and bribery, it is the responsibility of both host and guest companies to make abundantly clear their intentions and expectations. That way honour can be maintained all round.

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