25 April: The FIDS (Fraud, Investigations and Disputes Services) team at Ernst & Young has released new research revealing that middle managers consider any spending over £100 per head as ‘lavish’ when it comes to corporate hospitality.
The survey also shows that most managers do not know their company’s policies on entertaining as almost 60% were not familiar with their company’s polices in this area, while more than half of the managers questioned (58%) would like more clearly defined limits.
‘Lavish’ hospitality has been a repeated message of the Serious Fraud Office (SFO) in its explanations of how it sees corporate hospitality under the Bribery Act which came into force in July.
John Smart, partner at Ernst & Young explained: “The best protection for firms that want to avoid issues with the Bribery Act is to publish and enforce clear, written policies regarding any gifts, expenses or hospitality that might influence or be seen to influence their business dealings in any way. However, this can be difficult since the Ministry of Justice and SFO has not sought to provide financial limits when it comes to guidance on corporate hospitality.”
“Some corporate events this summer will see some businesses buying packages costing up to £7,000 per person. Although this may seem ‘lavish’ to many, the Bribery Act itself contains no specific rules, monetary limits or exemptions, which means that each case will ultimately have to be decided on the facts presented at the time, and the context."
Smart adds: “A great deal of the corporate hospitality being arranged at the moment will far outstrip the £100 per person cost that many UK middle managers consider to be ‘lavish’. However, often even more important is the context and timing of hospitality and the impression this may create.
“Receiving or offering entertainment in the middle of a tender process or sensitive negotiations is more likely to be inappropriate and store up enforcement and reputational risks. In general, many people should simply ask themselves – particularly in the age of transparency and social media – would they be relaxed if details and levels of their corporate entertaining became public?”
No decline in wine and dine
The research also revealed that only 18% of companies had reduced levels of corporate entertaining as a result of the Bribery Act.
The survey found that 68% of middle managers said the tighter rules on entertaining had either made no difference or they were unaware of any significant reduction to their hospitality spend.
Smart concludes: “Our experience is that companies are increasingly concerned with what is appropriate under the new landscape. This approach, while not reflected in reduced spending, has seen more soul searching by companies or organisations and more refusals of certain hospitality and gifts. This is a positive trend showing an engaged confidence on the part of most businesses and organisations, recognising that bona fide hospitality is not criminal.
“Enforcers have made clear that action will be taken when hospitality becomes a bribe seeking to bring about what is called an ‘improper performance’ by a relevant decision maker or foreign public official.”
