CEBC IN THE NEWS

With Renewed Concern for Ethics, Companies Curb Holiday Gifts

Published Friday, December 10, 2004 by The Star-Ledger.

By Katherine Reynolds Lewis, Newhouse News Service

In the wake of recent corporate ethics scandals, more companies are curbing holiday gifts for business purposes, either by setting spending limits, encouraging charitable donations, or banning presents outright.

"They don't want to be perceived as buying customers' business," said Dan Sondhelm, an Internet shopping guru with Butterflymall.com, a cash-back marketplace based in Alexandria, Va.

Government prosecutions of executives at Adelphia Communications Corp. and Tyco International Ltd. brought to light lavish gifts exchanged to cement business relationships, from a $4,500 case of wine to a $7,000 golf outing. The ongoing lawsuit over the firing of former Walt Disney Co. President Michael Ovitz touched on Ovitz's gifts of a $1,200 Roy Lichtenstein print and a nearly $1,000 firearm to Hollywood bigwigs, according to news reports.

Securities regulators are investigating whether expensive wine, Super Bowl tickets, golf outings and other junkets violated limits on gift-giving by Wall Street brokerages to mutual fund executives.

In this environment, business leaders are becoming more sensitive about avoiding conflicts of interest, said Nell Minnow, editor at the Corporate Library, a research firm that specializes in corporate governance.

Companies should have a clear policy with a dollar limit on gifts, something like $35, and no entertaining without the boss's permission, said Minnow, whose firm is based in Portland, Maine. She said she'd like to see an end to "business" done over golf and Super Bowl outings.

"I would like decisions to be made solely on commercial grounds," Minnow said. "These are very easy problems to get into."

Some companies are simply refusing to accept gifts and directing business partners to their favorite charity, as Target Corp. has done, said Bob Shoemake, director of programs and membership at the Center for Ethical Business Cultures, a Minneapolis nonprofit educational and research firm.

"We were both surprised and actually delighted," Shoemake said of Target's move. "It's a real example of one way to say, 'Here's the standard.' ... When all of the choices seem OK, in an ethical company the default is to the higher standard."

EvensonBest LLC, a New York-based distributor of office furniture, used to mark the holidays by giving customers bottles of champagne, gourmet food baskets, expensive dinners out or theater tickets. As recently as six years ago, the majority of clients -- ranging from government agencies to Fortune 500 companies and law firms -- accepted.

But times have changed. After getting notices from several major clients that their policies prohibited receiving gifts, founding partner Vernon Evenson decided to throw a holiday carnival for Project Sunshine, a nonprofit agency that provides free programs and services to children with life-threatening illnesses.

"It's always a dilemma for us, because depending on what kind of client you have, the expectations of the holiday, from an ethics standpoint or culturally speaking," vary by industry, Evenson said.

Some customers won't even accept cards saying a donation was made in their name. "Then there are other people who might be offended that you don't take them out to a $500 dinner," he said.

Client feedback about the carnival has been very positive, and next year the company may invite customers to attend a similar charity-oriented event, Evenson said.

As for executives who may have switched to a furniture supplier who gave better perks, Evenson said he's happy with the customers who remain. "At the end of the day, they're nicer people to do business with and more like-minded," he said.

FCF Schmidt Public Relations Inc., based in Plymouth Meeting, Pa., also is switching to charity, donating to a local anti-hunger coalition on behalf of the company's clients, said President Maribeth Schmidt.

Both the seller and buyer in a corporate relationship benefit from policies that restrict gift-giving, said Eleanor Bloxham, chief executive of the Value Alliance, a consulting firm based in Westerville, Ohio.

If decisions are made based on purely business reasons, companies get the best price and product for their needs, Bloxham said. Investors, customers and employees are better off, plus vendors don't waste their shareholders' money trying to buy business with lavish gifts and entertainment, she said.

"It's also important in terms of the reputation," Bloxham said. "It is an important area for boards to take a look at in terms of the relationships and making sure there are no crossings of the lines between a gift and something that's more like a kickback."

Companies should be explicit in their codes of ethics about thresholds for gifts, and publicize the rules, Bloxham advised.

"In the investment world, it's been quite common to have brokerage firms send the trading floor of an investment group one of those big popcorn things or cookies or something for people to share in the office," she said. "That's a big difference from insisting on expensive entertainment and the like."

It's probably best for companies to simply ban executives from accepting gifts, Shoemake said. "The people who get the most expensive gifts aren't people who need them anyway, because they have plenty of money," he said.

"If they want a toy, they buy it. Every year you're racking your brain, what can I give them that's creative and interesting?"

But for every business ethicist urging restraint, there's a marketing expert touting gifts as an important tool to stand out in your customers' minds.

"To foresake the giving of gifts because of the political climate is allowing yourself to be held captive," said Jack Burke, president of Sound Marketing Inc. and author of "Relationship Aspect Marketing."

Money isn't as important as choosing a gift that suits the recipient. The best gift Burke ever received was from a client who asked Burke's top 10 clients to talk into a tape recorder about why they liked working with him.

"I sat here crying like a baby," he said. "He really taught me the power of the personal touch."
 

© Copyright 2004 Newhouse News Service. All rights reserved.

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