The dictum made popular by free market economist Milton Friedman that there is no such thing as a free lunch never seemed so prescient. Finance directors would do well to remember that old adage as the new UK Bribery Act comes into force.
But with only two months until it is implemented, there remains much head scratching among FDs and their lawyers about some key areas of the Act. It remains unclear what actually constitutes a bribe and, if a bribe is made or received by an employee, what constitutes having “adequate procedures” in place to prevent an act of bribery taking place.
Some see the dividing line at, for example, corporate hospitality events - where no business talk is expected to be held: the event is purely for enjoyment.
“The fallacy is: what actually constitutes a bribe?” Andy Blackstone, FD at advertising agency M&C Saatchi tells Financial Director. “If I take a client to the cricket, that is okay because we are able to talk, but if I took them to a tennis match, that is not acceptable because we are unable to talk.”
The Act makes an offence of both the act of bribery itself as well as the new corporate offence of failing to prevent any act of bribery being carried out by a company’s employees or associated persons - which includes agents, distributors and subsidiary companies that may be outside of the parent’s control.
However, the same Act turns a wide range of practices that might currently be seen as acceptable “schmoozing” into criminal offences - such as corporate hospitality, which could include a trip to the recent Ashes series in Australia - and punishable with a 10-year jail term, and leaving companies on the hook for unlimited fines.
A bribe may take any form and is referred to in the Act as a “financial or other advantage”. The offence of bribery is very widely drafted and applies to both the public and private sector. It is not limited to the actual giving or receiving of a bribe - to “offer, promise, request or receive” a bribe may also contravene the Act.
Concern has been expressed that the Act is so widely drafted it has the potential to criminalise conduct that was previously not viewed as criminal. How this will affect a chairman inviting one of their non-executive directors for a lunch to discuss a delicate board matter, or HM Revenue & Customs boss Dave Hartnett accepting an invitation to dinner with BT - one of many such invitations he received in 2009, according to data from the Bureau of Investigative Journalism - is not clear.
“The definition of bribery is too uncertain on what is caught by it and what is not, on what is reasonable and what is not,” the FD of a housing association who prefers to remain anonymous tells Financial Director.
Laurie Anstis, associate in the employment team at law firm Boyes Turner, says: “The statute doesn’t define corporate hospitality one way or the other. It is too widely defined, but I can understand why the government has done that - it wouldn’t want to give a precise definition that lawyers can get round.”
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