Breaking bread – not the law: What you need to know about entertaining clients
Protecting the principle of free and fair competition was a key tenet of the Bribery Act 2010, which came into effect on 1 July 2011. Anyone who has lived in or conducted business in some of the world's more exotic locations will truly understand the need for such deterrent legislation to level the playing field, in law at least.
The roots of this act trace back to the US Foreign Corrupt Practices Act of 1977, amended in 1998 after an anti-bribery convention the year prior. But the UK Bribery Act went much further, becoming acknowledged as the 'toughest anti-bribery regime in the world'. Clever us.
The real world problem for UK media firms trying to entertain clients is that, in an industry of consolidated and shareholder ownership, most larger players are bound not only by the US and UK bribery legislation, but also the Sarbannes-Oxley accounting regulations, covering US owned firms and their global subsidiaries, adding further complexity and cost.
Laws are only ever tested at trial. In the first instance, they are merely interpreted by the legal advisors of the firms seeking to implement a suitably robust compliance regime providing owners, directors and employees guidance and governance to ensure – as far as possible – that internal policies are fit for purpose, ie keeping everyone out of court.
The issue for HR directors, particularly of US-related firms, is arriving at a policy that fully satisfies the strict liability of the UK Bribery Act. Companies are not only globally responsible for their own people, they are also globally responsible for 'associated persons' – effectively their entire supply chain of agents, sub-contractors or JV partners.
Strict liability means if you are guilty, you are guilty. There is no lesser crime or extenuating circumstances. The legal entity and its guardians hold personal and several liability for the actions of all. It is not only a crime to bribe, but to be bribed. Think unlimited fines and up to 10 years' imprisonment. Maybe now we begin to see the fear behind 'you can't buy me a drink'.
The earliest days of new laws are always the most fearful: no one wants to be the one made an example of. Share prices and brands would be decimated by an action under the Bribery Act. The only possible mitigation available is for the company to prove that a suitably robust compliance and prevention regime was in place, including staff training and regular review.
Since 2011, the handful of prosecutions under the act have all concerned the corrupt actions of individuals in public office – the main target for the law, and not a single one concerning a proactive staffer getting to know their client over lunch.
That is the main point of this article: providing there is no intention to bribe, no one is going to court, let alone prison. Yet many internal policies interpret the act in the most risk averse way, and rather than rely on common sense or trust the judgement of individuals, firms have provided themselves with comfort through simple blanket bans.
There is another factor: it seems that the larger firms (with the most money to pay for the best and probably most expensive legal advice) are the ones saddled with, arguably, over-engineered policies, which of course would probably provide the best defence. Whereas many smaller firms have barely a policy in place. Perhaps the question should be about best practice, rather than best policy. The firm that never breaks the law need never worry.
The act covers corporate gifts as well as corporate entertainment. Always, it is for each company to decide their own arbiter: what is reasonable and proportionate. The law precludes the lavish, the extravagant – but as these have never yet been tested or specified, it seems corporate hearts run scared, and that's why 'you can't buy me a drink'.
Is it that many policies are an ass, not the law? Upon introduction, the Ministry of Justice guidance notes specifically reassure that the intention was not to limit those who 'seek to improve their commercial image' or 'better present products' or 'build business relationships’. In fact, the then secretary of state for justice, Kenneth Clarke, specifically stated in his guidance that "rest assured, no one wants to stop firms getting to know their clients by taking them to events like Wimbledon and the Grand Prix".
What does that say for many current internal policies on client entertainment? In recent weeks, we heard news that the size of the economy is now greater than it was before the crash – which means companies again have money to invest in developing their client relationships, in developing their business and further growing their sales figures.
The Bribery Act 2010 was never intended to limit such obviously necessary business activities, so why on earth are intelligent brands suggesting otherwise? See you next Thursday.
Do you want to know more about what the Bribery Act really means? Tweet @thedrum questions with the hashtag #BreakingBread and the no-nonsense advisors at media specialists Sheridans will answer in future editions. If there is sufficient interest, we might even get everyone together for a Bribery Act roundtable.
Twenty Rather Good Shouts
Taking a cross-rail approach to media London, the Mr. Sykes Modern Concierge 20 best suggestions for client dining continues with numbers 18 and 17...
18. The River Cafe Private Dining Room
Thames Wharf, Rainville Road, London W6 9HA
