During his first year in business, Rogelio Santos Jr. landed a meeting with a promising prospect. Looking to gain a new lead in the ruthless land-title industry, he and his partner delivered their top sales pitch. The client was receptive, and the deal seemed a lock — until the meeting took a sudden turn.
“The next thing you know, I’m in the kitchen of this office,” recalls Santos, now CEO of Lebanon, N.J.-based land title search agency LandIT Technologies Inc. “I’m alone with the owner. He just turns to me and says, ‘So, what else do you have to offer?’ Just like that, blunt as day.”
Santos found himself facing the same moral conundrum that thousands of entrepreneurs deal with every day, including here in Canada. Bribes. Kickbacks. “Special gifts.” Whatever you call them, unwarranted extra incentives have been an unspoken facet of business for centuries. If you don’t establish a company policy on how to handle requests for graft, an employee might accede to such a request and do serious damage to your firm.
Santos took the high ground in that office kitchen. Although he chose to lose the client rather than agree to an unlawful incentive, he understands the temptation others face. “Many of the smaller companies will do it because they feel they have no choice,” he says. “They feel squeezed. They want the business so badly that they’re willing to do it.”
Pragmatists may rationalize paying a bribe by deeming it an unfortunate cost of doing business, but honouring a request can yield much more than a few unexplained expenses at your month-end. Corporate kickbacks are illegal and unethical, carrying stiff consequences that can destroy your organization, reputation and bottom line.
Knowing this, many large corporations adopt detailed anti-bribery policies as a matter of course; growing companies, on the other hand, are less likely to do so. Busy with the day-to-day scuttle of doing business, entrepreneurs tend to assume that good intentions will be enough to block bribery. However, even the loftiest ideals are not always enough to navigate the murky area between right and wrong when a crucial deal hangs in the balance. And since one slip-up can cost you big time, it’s crucial to take a formal stand.
A habit of corrupt transactions can start innocently enough. Jim Ridler, an ethics specialist and assistant professor at Queen’s School of Business in Kingston, Ont., says something as simple as proffering NHL tickets in exchange for a contract can start you down a slippery slope of adverse business practices. Once you indulge one under-the-table request, it sets a precedent for your staff and associates to do the same. Moreover, your clients will start to assume that perks are a given at your company. And word of that type of behaviour travels fast in the business world.
“It isn’t just, ‘Oh, gee, that’s not nice,'” says Ridler. “It hurts your business. You’ll find more difficulty working with your suppliers if they don’t trust you. You’ll find more difficulty working with your customers if they don’t trust you.”
Dennis Jaeger, director of Vancouver-based marketing consultancy denjae Consulting Ltd., believes gambling his reputation on a dubious transaction would plainly not be worth the risk. Like Santos, he has witnessed illicit behaviour many times; in past international dealings, he encountered individuals who considered graft an acceptable mode of operation, and he saw business relationships corrode or even collapse as a result.
“I never, ever want to be in the position, whether I’m before a judge or speaking to a client, where he says, ‘I understand you’ve done a bit of wheeling and dealing with those boys,'” says Jaeger. “I don’t ever want that to put me in a position where I’d have to explain my behaviour. Once you’ve done that, there’s no removing it.”
Sticking to the moral high ground is easier said than done when a crucial sale rests on your decision. In such cases, both Santos and Jaeger recommend diplomatically offering safe and legal incentives to keep a customer’s interest. Santos, for example, has handled requests by suggesting his clients take part in a mutually beneficial joint venture program, while Jaeger feels an openly documented finder’s fee is a “perfectly acceptable” means of rewarding a beneficial business deal.
Aside from keeping your reputation clean, legit behaviour can help you avoid “very dangerous territory” with the law, says Joanne Paquette, Ottawa-based senior legal counsel for Export Development Canada. Potential consequences include fines, professional penalties (up to professional disbarment) and imprisonment (in Canada, up to five years for bribery, and up to 10 for possessing or laundering kickback proceeds). And your troubles won’t necessarily end on the home front, either. International palm-greasers can find themselves in the hot seat with the RCMP, not to mention regional forces in every jurisdiction in which they’ve violated local law. Whether it’s illegal in Canada to pay a bribe overseas to a foreigner in the private sector is unclear, but there’s no doubt that it is if you bribe a foreign civil servant. However, says Paquette, there has only been one conviction under the federal Corruption of Foreign Public Officials Act since its inception in 1998.
Paquette suggests entrepreneurs take a few hours to create an anti-bribery code, then put it into practice right away. It need not be long or detailed, although you may wish to consult a lawyer or business advisor. At its root, your policy has to state clearly that your company has a zero-tolerance policy on indulging, accepting or offering bribes or kickbacks.
Furthermore, Paquette and Ridler agree that as an employer, your willingness to actively promote, abide by and enforce the policy is every bit as important as the document itself. If you don’t train employees to accept the code, it will be little more than a faded sheet on the lunchroom wall. To put the policy into practice, Paquette recommends making it mandatory for all employees to sign it every year. She also suggests setting up a system so your staff can provide anonymous tips to management about possible bribes or kickbacks, whether online, on paper or by phone.
And if you discover one of your employees or agents has violated the code? Proceed with caution, but stick to your company’s principles. If you’ve made your anti-bribery policy an explicit part of an employment contract, and you still find irrefutable proof of a worker’s misconduct, you might have grounds for dismissal. Paquette recommends that if this occurs you also take a close look at your firm to identify any systemic causes of corruption, and even consider a voluntary external audit of staff practices.
While there’s no easy way to avoid the reputational damage caused by firing a corrupt employee, she says proof of a pre-existing formal policy can do wonders to salvage the name, and future prospects, of your business. “You have to be able to stand up as a business owner and say, ‘I’ve done everything right. I have a code of conduct, and (employees have) all signed on to it. This is an unfortunate isolated incident, and I have taken care of it,'” she says. “Swift action has to be taken, and you have to back it up with (proof) you’ve been taking all the right steps.”