By Ann Sultan, Counsel, Miller & Chevalier
Nathan Lankford, Member, Miller & Chevalier
Restaurant weeks around the country bring together many people for business lunches and dinners. On the occasion of last week’s Restaurant Week in our hometown, Washington DC, and the current Restaurant Week in New York, we thought it would be a good time to highlight some of the fundamentals of managing anti-corruption risks of meals and other types of hospitality.
Like cooking, drafting an effective hospitality policy is both an art and a science. Chefs, similar to compliance officers, have a broad range of ingredients they can use in creative ways, but the best ones manage to present an experience that leaves people satisfied and with lasting impressions. From our experiences building and benchmarking compliance programs for a broad range of companies, we offer a tasting menu of the key components of an effective hospitality policy designed to address risk under the U.S. Foreign Corrupt Practices Act (FCPA) and other anti-corruption laws.
The introduction to a hospitality policy should set the right tone and lay a foundation for the concepts to follow. In particular:
- Scope. Introduce readers to the policy by carefully describing the activities and types of benefits that it covers. Specifically: the does the policy cover just meals and gifts, or does it also cover travel and other forms of business courtesies or entertainment? What types of recipients does it cover – does it apply to hospitality given to any person, or is it limited to government officials?
- Universal principles. At the outset, provide some universal guidance that applies to all types of benefits covered by the policy, to equip employees to handle situations that might not fit neatly into one category. For example, a policy can note up-front that the company does not allow benefits that could be viewed as lavish in the given locale, or with the expectation of receiving some type of inappropriate business advantage in exchange for the hospitality.
To satisfy the reader’s hunger for practical guidance, the meat of an effective hospitality policy should consist of clear, substantive requirements and prohibitions. In particular:
- Approval process. Let employees know the process they must follow to ensure documented review and sign off by personnel with appropriate levels of expertise and authority. This includes letting the employee know when to seek approval (g., for what types of hospitality, triggered by monetary thresholds discussed further below), which request forms and information are required, and from whom they should seek approval.
- Monetary thresholds. Related to the approval process, let readers know what monetary thresholds trigger special review requirements. For example, the policy may require only standard business approvals for meals under a certain defined value (g., meals under $20 only require approval from the employee’s direct manager), whereas higher value meals may require a formal request and advance approval from compliance counsel.
- Recording. In keeping with the FCPA’s accounting provisions’ requirement that “issuers” maintain accurate books and records, policies should reinforce the importance of accurately recording each instance of hospitality and provide specific guidance for doing so. Such guidance should address records of requests, supporting documentation, and associated transactional records.
Effective hospitality policies are often enhanced by additional substantive requirements and prohibitions to address specific risks. For example:
- Receiving hospitality. While the FCPA does not prohibit employees from receiving improper hospitality, other laws such as the U.K. Bribery Act do, and such benefits may also violate companies’ conflicts of interest policies. In this context, many companies’ hospitality policies include specific requirements and prohibitions regarding the receipt of hospitality by employees, such as value thresholds above which employees must notify their managers or compliance of hospitality they receive.
- More stringent provisions for public officials. Because of the heightened risks presented by giving gifts to government officials and employees of state-owned entities, many policies include more stringent review and approval requirements for hospitality to such recipients, often with lower monetary thresholds for compliance approval (compared to those for employees of private entities).
The conclusion section of a hospitality policy is an opportunity to leave employees with a few key takeaways, reinforcing key concepts and providing guidance on what to do if they crave further support.
- Seeking guidance. Because no policy can address the full range of questions or situations that an employee may face, it is important to remind readers of the basic principles behind the company’s requirements and prohibitions, and where they can turn for additional guidance if they are ever in doubt as to whether hospitality is appropriate. This type of reminder typically includes the contact information for appropriate compliance personnel who are available to answer specific questions.
- Reporting suspected wrongdoing. As with any type of compliance guidance, a company’s hospitality policy is an opportunity to further publicize any systems for confidentially reporting possible misconduct (g., hotlines), including any duty to report, instructions on how to access such systems, and assurances regarding non-retaliation.
Finally, as with most dishes, presentation is key. Just as a Michelin star restaurant serves food in a very different way than your favorite food truck, a policy written for a company consisting primarily of salespeople should read differently from a policy written for a company of engineers, so it connects with its audience. To achieve this connection, it is very helpful to get business unit management input during the drafting process, as well as input from those anticipated to most frequently use the policy. But regardless of the audience, the best policies are generally written in simple, clear, approachable language. Short sentences are great. If the policy is being distributed in foreign jurisdictions, make sure its language, tone, and content are appropriately translated, and that any cultural references are in good taste.