A gift taking dilemma

I will like for us to consider the following situations:

a) The managing director of a firm which is asking for a loan from a bank makes it clear to the credit officer with whom he is dealing that if the credit is granted she can expect N300,000. Moved by this expectation the credit officer pushes through the granting of the credit even though she privately has serious doubts about the creditworthiness of the
borrowing firm.

b) A contractor who has got a large contract from a local government usually gives the chairman of the local government a “thank you gift” in cash equivalent to about 10% of the value of the contract. He does this after the contract has been completed and he has been paid. Nothing is usually requested nor offered before completion of the contract.

c) A management consultant invites the managing director of a firm to which he has presented a proposal to have lunch together in order to have further discussions. He gives the managing director a good lunch in a first class restaurant.

d) A company’s operations manager receives several hampers during the Christmas
period from suppliers and contractors.

e) A company’s purchasing manager often receives business gifts from suppliers such
as diaries, calendars, and novelties.

These examples should be useful in visualizing the wide variety of situations which can be covered by the tag “business gifts.”
A basic principle is clear and, at least in theory, uncontroversial. It is always wrong to undertake, whether explicitly or implicitly, to breach one’s fiduciary duties to one’s employer by, for instance, awarding a contract to somebody who is not the person who offers the most advantageous terms (from the point of view of one’s employer), in exchange for receiving some money or other personal advantages.

This principle makes it clear why scenario a) above, in which a credit officer is moved by the promise of a cash payment to grant a loan against her better judgment, depicts a clearly unethical transaction.

None of the other scenarios offends clearly against this norm, at least on the basis of the information provided, but this does not mean that all of them would be given a clean bill of ethical health by experienced businesspeople.

The reason for this is that, as was discussed in the note on conflicts of interest, conflict of interest situations ought to be avoided if there are no strong reasons to the contrary (reasons from the point of view of the contracting firm, not the personal advantage of the manager making the decision).

Obviously, accepting a gift from a party with whom one’s company does business (especially if the gift is substantial) can easily create a situation of conflict between the pull of personal gratitude and the duty to defend the best interests of one’s company.

On the basis that the parties involved have placed themselves in such a situation of conflict of interest without any apparent real reason for it, beyond their seeking of personal advantage, scenario b), in which the chairman of a local government receives regularly substantial “thank you payments” from a contractor, constitutes a breach of ethical conduct. Of course, this assumes that the gift is given out of pure gratitude. In practice it is extremely likely that the payments are understood by both parties to be payments aimed at ensuring that the payer keeps getting contracts
in the future. In that case they would actually constitute bribes.

How about scenarios c), d) and e) in which people are given a good lunch, a Christmas hamper, and several business novelties? One would need more information (e.g., about the contents of the hamper) in order to speak with certainty, but the point can safely be made that where a gift is very small and giving and receiving such gifts is a common social and business practice, no real danger exists that a moral commitment to steer business to the giver, even if this is against the best interests of the receiver’s company, will arise. If this is the case no conflict of interest will have
been created.

Still, determining in each case where to draw the appropriate borderline can pose extremely tricky problems. Probably the best solution is for each firm to have an explicit policy that presents above a certain value are to be rejected or, if this is not practicable, given to a named department (usually personnel) for appropriate disposal.