News focus: When is a gift not a gift?

8 August 2011

9 August 2011 | Adam Leach

Under the new bribery legislation, companies don’t
need to have done anything wrong to face prosecution and a considerable fine, discovers Adam Leach

On 21 July, the Financial Services Authority (FSA) announced it had fined professional services firm Willis Limited £6.9 million. Although there was no evidence that corruption had taken place, the FSA explained that a lack of controls at the company meant there was an “unacceptable risk” that payments made by Willis to third-parties overseas “could be used for corrupt purposes, including paying bribes”.

The next day, the Serious Fraud Office (SFO) announced that Macmillan Publishing was to be fined £11 million, plus legal expenses, for possibly benefitting from “unlawful conduct”. An investigation by the SFO into contracts ruled:

“It was impossible to be sure that the awards of tenders to the company…were not accompanied by a corrupt relationship.”

The two fines came in the same month the Bribery Act 2010 came into force. While they were not issued under the Act, future offences will be covered by it and regulations from industry watchdogs, such as the FSA, are likely to run in parallel, if not mirror the new legislation. So the message is clear: do everything in your power to stamp out bribery and corruption or put the financial stability of your organisation at risk.

Anthony Woolich, partner at law firm Holman Fenwick Willan, explains: “What the new Act does is create a no-faults offence for a company of ‘failure to prevent bribery’. This means the business doesn’t need to have done anything wrong, but if it is simply deemed to have failed to prevent bribery, it commits the offence.”

Woolich says companies need to put in place an anti-bribery policy and get not only employees, but also agents [third parties] to comply. “They need to be advising clients on how they deal with intermediaries and get them to insert language that basically requires the intermediary to comply with the company’s anti-bribery policy,” he explains.

Anil Alim, procurement and supply chain director at Westbury Street Holdings, has set up a gift and hospitality log where every item received by the team is recorded and approved by him. He then created a formal policy, based largely on the Bribery Act, and distributed it throughout the business. “Every kitchen now has the notice up, so it’s like a health and safety notice,” says Alim. “We’re also holding six-monthly reviews with all operations managers on how it’s followed.”

In addition, Alim composed a letter for suppliers worded so that mere acceptance of the letter constituted confirmation that they would comply with the Act.

“We then sent it to our 1,900 suppliers marked for the attention of a senior member of staff (either managing director or company secretary), advising them that we are taking this legislation very seriously and would appreciate it if they accepted this letter and comply with the Act,” he explains.

Alim also established a policy at Westbury where all gifts accepted by the company’s purchasing team were raffled to the whole workforce, with the money generated from it going to charity. Overall, though, he believes that procurement can only do so much.

“The best thing we can do is to try to make people understand the difference between gifts and bribes,” explains Alim. “Put very simplistically, a bottle of wine might be a genuine ‘thank you’, but a case of wine? Turn it down. You’ve got to apply common sense.”

The importance of common sense is also clear when it comes to justifying corporate hospitality. The government has said “reasonable and proportionate” hospitality is fine – although the interpretation of this remains unclear. Asked where companies might get into hot water over taking prospective business partners to events, Woolich says: “It’s far harder to justify if someone from the host is not present. If I give you two tickets to Lords and say I’m not coming with you, it’s much harder to justify than if I take you to the event.”

Sarah-Jayne Aldridge, a procurement category manager at Telefónica, believes the relationship procurement teams have with suppliers and stakeholders is of great importance because it affects their ability to influence them. “If stakeholders can select suppliers without a proper process, you can’t monitor or manage it,” she says. “We try to be aligned as closely as possible to our stakeholders, so if there are issues concerning bribery or corruption we can help them.”

But, she says: “It’s not something about which you can put your hand on your heart and say: ‘We have no corruption within the organisation.’ It’s down to the trustworthiness of your stakeholders.”

Aldridge hopes the repercussions of engaging in corruption or bribery will be motivation enough for everyone to stay on the right side of the law. “As procurement, we sign up to a code of ethics. If I break that then I’m not going to be able to get a job in the sector, which is my livelihood,” she says. “I think it’s down to what’s going on in your own professional environment.”

David Loseby, who recently finished setting up a supply chain for pub firm Stonegate, says getting senior management on board is essential. Instead of keeping it as a procurement-based policy, he got the HR team and Stonegate’s chairman to help publicise it.

“It needs to be delivered right from the very top and the behaviours need to demonstrate support for the sentiment behind the Act,” he says.

But like the others, Loseby realises there is only so much that management can control. “You can set out the culture of an organisation, but it’s the people you need to change,” he says. “The moment you become compromised, you’ve lost your career, your worth and your value as a professional.”

The reality is that no matter what action companies take, bribery and corruption can still rear their ugly heads. However, the no-faults offence means inaction is enough to result in a hefty fine. So doing all you can to prevent it is important – or as Woolich puts it, “a no brainer”.

See CEO update from the August issue

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