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Ethical business relationships

by Dr Simon Longstaff
05 March 2003
BUSINESS AND PROFESSIONAL ETHICS
Despite the unflattering rhetoric – often employed by business people themselves – companies are not impersonal machines for generating profits. As we all know (but tend to forget), businesses are human institutions built around a web of relationships.

Unfortunately, managing human relationships is a bit like trying to juggle mercury. One of the juggler's greatest challenges is to work out how to build and reinforce relationships in a manner that does not contravene fundamental ethical principles.

For example, some people in business think to secure their position by routinely offering gifts and hospitality to their commercial counterparts. I gather that this kind of thing is fairly common in the advertising industry – especially when it comes to the relationship between media companies and those within agencies who buy their services for advertising.
 
The situation in Australia has evolved to a point in which any gift offered, in the context of a commercial relationship, must be assumed to be for the purpose of securing a business advantage.

While it's up to every organisation to establish its own position in relation to gifts and hospitality, there are a few considerations that might usefully be taken into account. First, we need to recognise that there has been a steady (and regrettable) trend towards looking at all relationships in business through the lens of commercial considerations.

For example, there used to be a time when people would share a meal without ever giving much thought to the implications for the bottom line. In such circumstances, it was possible to get to know people (as people) rather than as yet another 'business opportunity'. Managers now routinely insist that every dollar spent by a company should be in the expectation of a commercial benefit. Now, every meal must be reframed as a 'commercial opportunity' in which each party assumes that the other is out to 'get something of value'. In these changed circumstances, it is essential that new standards of probity be applied. If every meal is nothing more than the prelude to a transaction, then there is an inherent risk that one party or another will be trying to secure an 'unfair' advantage over its competitors.

Why label the advantage 'unfair'? Well, the risk is that any commercial advantage will be secured for reasons that have more to do with the quality of the entertainment than that of the goods and services being offered.
Let me be clear about the point being made here. I am not suggesting that there is something inherently improper about sharing a meal with a colleague. The trouble only arises in the context of a business culture that assumes that every relationship must be for a commercial purpose.

The same risks have come to be attached to the practice of gift giving. In some cultures, the giving of gifts is a customary practice associated with the deepening of friendship. As such, gifts are offered without any expectation of reward. In those cultures where gift giving of this kind is customary, great offence is taken at any suggestion that a gift might be a form of soft 'bribe'. Yet, those unfamiliar with traditional gift-giving practices will often assume that this is the intention.

Once again, the situation in Australia has evolved to a point in which any gift offered, in the context of a commercial relationship, must be assumed to be for the purpose of securing a business advantage. No other explanation can be assumed in our domestic trading environment. The risks associated with gift giving are, if anything, greater than those that arise in the case of hospitality. This stems from the fact that gifts can often be given and received in a form that is away from public scrutiny (or even that of colleagues).

Given all of this, a number of Australian organisations have imposed stringent restrictions on the practice of giving and receiving of gifts. Where gifts are allowed at all, the policy usually limits them to objects of only nominal value. Even then, there is usually an expectation that any gift will be declared to the employer – often with the prospect that anything of value be handed to the company for its benefit – or that of employees as a whole. Of course, all contact (hospitality included) is ruled out during certain times in the business cycle – such as when tendering processes are afoot.

Many people object to the application of restrictions of the type outlined above. In particular, people chafe at the implication that they cannot be trusted to do what is right. In an environment in which all people are assumed, above all else, to be self-interested, we should not be surprised that very little leeway be given to people in this area.

Compounding this tendency in our culture is the reality that some people can't resist the lure of personal gain and consequently put their interests before those of their employer or the clients they serve. Some gifts are of such a value (whether in the form of goods or hospitality) that any reasonable person would recognise the danger in their being accepted.

Yet, a clear lack of judgement is all too often masked by indignation at the suggestion that personal integrity has been questioned. Perhaps a first step would be for the advertising industry to collect and publish data on the range of gifts and hospitality being offered and accepted by the various parties to commercial transactions. That would allow an informed decision to be made about the extent of the issue to be addressed. After all, it has long been said “sunlight is the best disinfectant”.
 
Dr Simon Longstaff AO is Executive Director of St James Ethics Centre.