In the (international) business community, it is not unusual to give a gift as recognition for services rendered. A gift is given in appreciation of services rendered or in order to placate the future relation or improve it.
However, this is already quickly suspicious these days. The word corruption is at the tip of our tongue. “Kick back”. Still, this is remarkable. If heads of state give each other gifts in front of the camera, why is it suspicious to do so in the business community? Whether giving gifts is suspicious can be tested very simply. The problem of corruption may occur when (1) the officer is confused with the person, (2) the symbol is replaced with hard market value, and (3) in front of the camera is replaced with some backroom.

Officer versus person
If a head of state gives another head of state an antique vase, this is not a gesture from the person Barack Obama to the person Willem-Alexander, but from the President of the United States to the head of state of the Kingdom of the Netherlands. It is no different in the business community. A gift for a managing director of a company is not meant for the man or woman personally, but for the company. The personal relation is important, but cannot be dominant. In that case, the risk of business decisions being influenced by personal motives is too high. This is not in the company’s interest. Moreover, this creates undesired inequality regarding other providers of these goods or services: also if they would be better for the company, they would be subordinated on account of the personal obligations towards another supplier.

Symbolic value
The value of a gift is relative. One is happy with a rose, the other (only) with a Maserati. This type of happiness is not relevant in the relations between companies. Functionality has priority. The point is not to make people happy. A gift is a symbol and has to stay a symbol. Sometimes, a symbol can be expensive, but not necessarily so. As soon as hard market value is involved in a gift in the business community, the alarm bells have to go off. By definition, it is no longer a gift then, but discounts that have to benefit the company.

In public
Transparency is essential to good corporate governance. If gifts are given in front of the camera, so in public, everyone sees what is happening. Everyone can ask questions about the origin and the destination of the gift. If no one is aware that gifts are given, it cannot be checked. Neither the origin nor the destination can be assessed.

By testing the giving of gifts against aforementioned criteria, (the appearance of) corruption is prevented. This is important, for corruption costs money. The OECD recently calculated the costs of corruption (2014) at no less than five percent of the worldwide gross domestic product. That is over 2.5 octillion US$. This is so much that I cannot fathom how much.

Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com and perhaps your question will be discussed in the next column

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