All above board (First published by The Law Society Law Management Section)
10th October 2011
In the run up to the implementation of the Bribery Act 2010 on 1 July 2011, some of the strongest lobbying reportedly came from the corporate hospitality industry, where sponsorship is a vital source of finance. With corporate hospitality in the doldrums following two years of recession, the act was seen as the straw that could break the camel’s back.
So a collective corporate sigh of relief was heard when Kenneth Clarke, in the forward to the act's guidance, said “Rest assured – no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix”. The intention is not to catch genuine hospitality or similar business expenditure that is reasonable and proportionate, so you can continue to provide bona fide hospitality.
If you are considering a corporate hospitality programme for the next year, is it time to refresh or implement a policy in light of the Bribery Act?
Very generally, bribery is defined as giving someone a financial or other advantage to encourage that person to perform their duties improperly, or to reward that person for already having done so. A firm will have a full defence if they have "adequate procedures" in place to prevent bribery.
Implementing or updating a policy at this time would be one logical step (alongside other steps like other relevant HR and whistle-blowing policies) to ensure that you have such "adequate procedures".
Issues to consider when drafting a corporate hospitality policy
- Who manages the corporate hospitality budget and authorises expenditure?
- Do you have a central record of who you have entertained?
- Do you record information about client policies on the receipt of corporate hospitality?
- What type of entertainment is acceptable for different categories of client or intermediary?
- What provision may be made for transport or accommodation?
- Are there restrictions on overseas travel?
- Do policies differ in different geographic areas?
- Should any hospitality be suspended during a formal tender situation?
- What is the criteria for selecting clients or contacts to be entertained
The last issue will be perhaps the most important, as this will relate to the motive behind the hospitality. For instance, documenting and explaining the reasons for the choice of guests for a particular event will be important.
Corporate hospitality strategies tend to fall into two distinct camps.
The first, and more traditional, approach is partner-led. Decisions about corporate hospitality events are based on the hobbies or interests of partners, or because 'we've always done it this way', or because the partner is offered good tickets for an event and then the question of who the firm can invite along is raised. The result can be a lot of last-minute ringing around to find people keen on the activity – golf, sailing, opera – rather than focusing on securing the attendance of the clients that really should be entertained.
The second, and more client-focused approach is to consider first the client that you wish to entertain, and then propose an event which you know will be of interest. This works well where there is a structured key client development programme that identifies the firm’s most important clients and takes a planned approach to nurturing and developing those relationships. Ideally, you will know clients well enough as individuals to be aware of their leisure interests, and consequently organise appropriate events.
The Bribery Act guidance states that hospitality needs to be reasonable and proportionate for your business: “in any case where it was thought that hospitality was really a cover for bribing someone, the authorities would look at such things as the level of hospitality offered, the way in which it was provided and the level of influence the person receiving it had on the business decision in question.”
Although the guidance indicates that the meaning of "reasonable and proportionate" within a particular business will be affected by its size, the characteristics of its clients may also be influential. For example, a small niche practice advising fund managers is likely to have a larger budget per head than a large practice advising small owner-managed businesses.
An allegation of bribery is perhaps most likely to arise if a competitor perceives that a procurement process has been unfair, and that an allegedly improper decision is the result of extravagant hospitality. It is not uncommon to see outsiders slip onto shortlists via the back door, so it will be interesting to see if any significant tenders or panel appointments are challenged on this basis in the future.Back to Blog
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