Work-Ethics.com: Business Ethics Auditing and Human Resource Management

Accepting Gifts: Holidays or not...you need to be wary of conflict of interest.

- Dr. Samuel J. Juett

Giving and receiving gifts is a common occurrence as the holiday season approaches, so managers in your organization may be faced with how to handle gifts, gratuities, or premiums from sales representatives, grateful customers or clients, affiliated businesses, and vendors. Given the events of September 11th, 2001, we may witness an increase in the giving of gifts as interested parties feel moved to acknowledge the services provided by you and your staff. Now is an appropriate time to review advice on how to handle gifts and special event invitations.

Policies and practices on handling gifts and invitations to special events vary from company to company. Some organizations address the issue with policies that outline what an individual employee can and cannot accept. A pharmaceutical company in Indiana has a policy which states that no employee shall accept any gift, service, or favor which would lead toward favoritism or the appearance of favoritism in any way. Employees are instructed to "refuse any gifts or favors which may reasonably be interpreted to be offered to influence a purchasing or favorable business practice decision." Employees are admonished to be wary of accepting gifts from individuals doing business with the company or whose financial interests are "substantially affected" by the corporation's action. The policy advises employees "That while you are the first to decide whether to accept any gift, you must recognize that others will decide if there is 'the appearance of favoritism' for your having accepted a gift." The policy specifically outlines which gifts an employee must declare if accepted, such as, Colts football tickets, IU Basketball tickets, NCAA final four games, and symphony hall performances.

It may be impossible in some situations to convince the general public that a gift to a public employee is merely a "thank you" or a courtesy and not a bribe or payment for some past or future favor. Gifts, even those of nominal value, can create the perception of undue influence. Often, perception is reality in the public domain: this has to be an important consideration if yours is a publically-traded company, under the scrutiny of various required and "self-appointed" watchdogs. The potential harm to an organization's credibility is not worth the risk leading some companies to ban all gifts to employees, excluding personal gifts from friends and family. Other organizations gifts, but when received, donate them to nonprofit service organizations. One large Internet-service provider recently faced this issue when a satisfied client offered to provide all employees in one department with hams. The ISP declined the offer in writing but when the 75 hams arrived anyway, decided that it made sense to donate them to a local food bank. In other communities, 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.

Managers and senior level employees face similar challenges when deciding whether to accept invitations to social events that are related to their work. Clearly, it is unethical in some instances illegal to accept gifts or invitations to any event where the intent is to buy favor. Recognizing that business is often conducted at social events and paying your own way to attend an event is not always feasible, some managers do accept invitations to social events when the overall purpose is to further the company's interests. Other managers 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.

In determining what is suitable for you and your company, consider the guidance offered by elements of a code of ethics providing a guideline on gifts.

It stipulates that:

Employees should not directly or indirectly solicit any gift or accept or receive any gift; whether it be money, services, loan, travel, entertainment, hospitality, promise, or any other form under the following circumstances:

it could be reasonably inferred or expected that the gift was intended to influence them in the performance of their job responsibilities and duties; or
the gift was intended to serve as a reward for any corporate action on their part.

It is important that the prohibition of unsolicited gifts be limited to circumstances related to improper influence. In de minimus situations, such as meal checks, some modest maximum dollar value should be determined by the corporation as a guideline. The guideline is not intended to isolate members from normal social practices where gifts among friends, associates, and relatives are appropriate for certain occasions.

You work hard to establish credibility and trust among your colleagues, the other businesses with whom you do business, and most importantly-- with your stockholders. 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!

As you approach this season, consider the following:

Does your company have a policy on gifts and attendance at work-related social events to guide employees? Is it clear and appropriate?
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 favorably by your colleagues, other vendors, stakeholders or stockholders of the corporation?
Is the gift you or your employee may accept worth the headline that it may generate?

If you have a question about your obligations as an employee, please refer to your organization's code of ethics.... if they don't have one, then work-ethics.com can provide a solution to those needs.