Last week the Department of Justice formally charged ex-Virginia Governor Bob McDonnell and his wife with illegally soliciting and accepting lavish gifts and entertainment as well as loans from the (now former) CEO of Star Scientific in exchange for both:
- advocating for the company’s products to VA Secretary of Health, and
- speaking on behalf of the company’s products to doctors, health professionals and state researchers.
While the charges haven’t been litigated yet, and they are therefore innocent until proven guilty, we do know that the McDonnells’ apologized and returned more than $120,000 worth of gifts and loans. (Of course, the dresses were returned after Mrs. McDonnell wore them to special events such as the inauguration.) The ex-governor insists that he did nothing illegal, but he acknowledged “poor judgment.”
“Poor judgment” – yes, we in the ethics and compliance community have heard this before. We often hear it as an excuse why we shouldn’t take serious disciplinary action against great performers who violate the gifts and entertainment policy. We also understand that “poor judgment” includes some executives who don’t believe the company’s gift and entertainment policies actually apply to them.
For example, how many corporate executives were guests of vendors and suppliers at the Super Bowl last weekend? And we aren’t just talking about tickets. We are talking about flights, hotels, fancy meals, fine wines and game memorabilia. I have read (and written) a lot of corporate and government codes of conduct and gift policies and I don’t recall one that allows for the receiving or giving of Rolex watches, Louis Vuitton bags or weekends at the Super Bowl.
Further, I checked the Star Scientific Code of Business Conduct online (dated March 2004) and found the following language included:
Any gift, favor, meal or entertainment, whether given or received, should be of such a nature that it would not violate any law or the policies of customers or suppliers and would not place the employee or Star in a compromising position…It is your responsibility to use good judgment in this area. For those of us who work with government agencies, it is important to understand that we do not entertain or provide any gifts to government employees, as this is prohibited by law.
“Responsibility to use good judgment” – interesting word choice. Apparently the chief executive of Virginia and the chief executive of Star Scientific seemed to have missed both the spirit and letter of both of their policies.
So what does this all mean for corporate gift policies? And how do we help our employees – including our executives – understand our gifts and entertainment policies and why we have them?
Some Gift Policy Best Practices
It comes down to how we communicate and write our policies.
- We must clearly define acceptable limits of both giving and receiving. Many organizations want to put specific and low limits on what employees can receive, but insist on keeping “squishy” language on what marketing and sales (and executives) can give. Star Scientific’s policy is actually a bit unusual, and even ahead of its time for 2004, in requiring the same limits for both giving and receiving.
- Before we issue these policies, we must socialize with executives what the policy specifically means for them because they need to be ready to live with it and enforce it.
- We must clearly (and regularly) communicate and train on the policy with all employees.
- Finally, it is apparently important to define what we mean by “good judgment.”