Thought provoking article in London’s Evening Standard last night. Those tickets for Wimbledon may land you in jail says Chris Blackhurst, City Editor, explaining that “the new Bribery Act will criminalise acts of hospitality and place another bureaucratic burden on business”.
Got me thinking – and, quick caveat here, I do understand that some businesses and managers of them will be worried and concerned and I don’t want to belittle their efforts, but I have a couple of thoughts to consider. Firstly, maybe now’s the time to start demonstrating our support for principles-based legislation and regulation. Secondly, what is the purpose of all this corporate entertaining: does it provide value to stakeholders through improved relationships with customers and suppliers or through providing perks to the senior employees who do the entertaining and does it provide any value to stakeholders at all?
Over the last twenty years I’ve heard a lot of people in the UK argue in favour of principles-based legislation and regulation and explain why it is better than rules-based regulation, used “over there”, with dismissive wave of hand towards the East or the West, depending on the context. One way to look at the Bribery Act is as principles-based legislation. So, welcome to a world where you’ve got what you asked for!
Principles-based legislation and regulation brings with it a need to exercise judgment. This is by definition a situation of uncertainty because one person’s common-sense answer is another’s bright white line that they would not cross. Even more so, one person’s ex ante decision is often subject to savage ridicule after the event. In this case, it’s really down to the senior people in organisations to buckle down to the responsibilities of great office and exercise some judgment. That’s what they are paid the big bucks to do!
That brings me to the second point – maybe it is a good time for corporates and others to take a hard look at their entertaining and what its purpose is. Building relationships with customers and suppliers has long been seen as a legitimate activity for the organisation – and yet it is fraught with dangers of stepping over the line to undue influence. What we are learning in the risk management world is that we humans are – unconsciously – biased towards what we know. That makes it more likely that privileged access to events, places, nice meals and drink – and time out of the office – will tend to bias the recipient in favour of the giver, whatever justification we use. Is that bribery? Well, maybe it is, in the definition of the Act.
There is another aspect to all of this. Let’s not forget the personal incentive to the entertaining organisation’s management to justify the activity. It gives them the opportunity to network – and networking is good for all of us personally – but it also gives them privileged access to events, places, food, drink and time out of the office. It’s a perk. And, everyone fights hard to keep perks!
This is a blog about internal audit making things better. So, how can internal audit help? Firstly, play a role in informing the management team about what the Act says – and what it doesn’t say – and also what the Ministry of Justice guidance says; secondly, inspire the management to focus on its responsibilities and not waste time and energy on railing against the machine. Champion the purpose of all this – to reduce bribery and corruption in the world – and look across the profession to learn from the public sector where practices that seem normal to private sector managers have been verboten for years; provide an independent and objective challenge to managers as they seek to justify the reasonableness of what they have been doing, acting as a critical friend before the organisation comes to the attention of an unfriendly critic; and seek to catalyse real change to ensure that adult conversations take place across the levels of the organisation to help people decide what is reasonable. And, of course, provide management and the board with independent and objective assurance on the organisation’s procedures – are they really adequate to prevent bribery?
This is getting rather long but one last thought – there could be some serious consequences for organisations that depend for much of their revenue, particularly their premium high-margin revenue, on corporate entertaining and marketing budgets. Arts and sports organisations must be looking at this risk – so, of course, that’s another area where internal audit in those organisations can help.
What do you think? Is this a case of be careful when you wish for principles-based legislation because you might have to make a judgement? Is a ticket to the first Andy Murray Wimbledon final a bribe? Is part of the outrage a measure of the perks that employees enjoy? And, do public sector people wonder what all the fuss is about and mark it up as yet another example of how corporate people don’t know they are born?
Making things better 