Employee Gift Acceptance: Ethics, Policies, and Perceptions

Introduction

One of the universal issues in organizational ethics is the acceptance of gifts by employees. It is human nature to give and accept gifts during festival and holiday seasons and on special occasions such as birthdays and weddings. However, the central issue in corporate governance is the acceptance of gifts by employees — especially from suppliers and contractors, or more broadly, from any person who is doing business or likely to do business with the organization.

The reason why this is such an important issue is not hard to identify. While accepting gifts is a recognized social act, perceptions shift when the practice is examined in an organizational context. When a supplier offers a gift to an employee, the inevitable third-party perception is that the gift is offered in return for some kind of favor. This introduces an element of conflict of interest, which makes employers and stakeholders uncomfortable, as the image of the organization is called into question. It is for this reason that many employers take a serious view of employees accepting gifts. The distinct possibility that such a practice could cross the line into bribery is reason enough for many employers to discourage it. This issue is relevant to both the private and public sectors — particularly the latter, where customers are none other than the tax-paying general public.

The practice of accepting gifts is an ethical issue because it involves a moral dimension. Ethics is concerned with the study of moral duty — with what is good and bad, and with moral obligation. Employees faced with the situation of accepting gifts must confront the fundamental moral question of whether doing so is right or wrong. The central ethical element involved is integrity, defined as "a consistent adherence to moral, intellectual, professional or artistic principles despite temptations to abandon them" (Forrest, 1995, p. 32). In accepting a gift, an employee is aware of the risk to their integrity yet may find it difficult to decline. It is this risk to integrity that often prompts employers to take a firm stance on the issue.

However, it is difficult, if not impossible, to impose an absolute ban on employees accepting gifts. Even some top-level managers hold the view that simple gifts given in "good faith and spirit" by long-standing suppliers and contractors do not amount to a breach of ethics. To cite an example, it is quite normal for students or their parents to give gifts to teachers as a gesture of gratitude. Such an act does not necessarily mean that the student is seeking favorable grades or other concessions. But the downside is that other people — including other students — may interpret the act as an attempt to secure a favor, and may assume that the teacher, having accepted the gift, is morally obliged to reciprocate. A simple act can thus take on an unintended dimension, driven by the perceptions of those who are external to the situation but directly or indirectly affected by it. If, based on this concern, the practice of accepting gifts were entirely prohibited, those involved might reasonably feel that their private conduct was being unnecessarily regulated. Faced with this dilemma — one that appears to have no simple solution — organizations continually seek ways to address the issue of employees accepting gifts from external sources connected to the business.

Employer Perception

One of the primary reasons that governments and organizations seek to regulate the acceptance of gifts is the possibility that such acts may constitute bribery. The line between a gift and a bribe can often be very thin, although the implications of the two are very different. A bribe is typically offered with the expectation of receiving a specific favor. In most countries, bribery falls under criminal law, and employers are therefore anxious to eliminate any possibility of bribery scandals. High-profile scandals involving major global companies such as Enron and Arthur Andersen have demonstrated how quickly ethical failures can emerge, even in organizations with established best-practice frameworks. In international trade, offering and accepting gifts is a common phenomenon that can easily be interpreted as bribery, depending on the perspective from which it is examined (Ball & McCulloch, 1996, p. 41; Hoang, 1997, p. 68).

International markets present a complex environment with many variables — physical, cultural, political, economic, and competitive — as a result of which marketers tend to adapt specific strategies for each market. For instance, in many Asian countries, it is a socially accepted practice for buyers and sellers to exchange gifts as a way of fostering trust and strengthening business relationships (Wood, 1995, p. 56). The same is not necessarily true in developed European countries. Additionally, bribery drives up the cost of contracts and goods. One study estimates that in Asia, bribery can account for five percent or more of the cost of goods and services (Kraar, 1995, p. 12). Organizations are thus confronted with a double-edged challenge: they must implement effective marketing practices while ensuring that their employees are not party to acts of bribery.

Employers are also concerned that employees accepting gifts may lead to a decline in organizational performance and efficiency. It is reasonable to suspect that such acts could result in lower quality standards or deficient service. For example, suppliers may attempt to pass off defective goods and resort to gifting employees to conceal the effort. Contractors may seek approval for incomplete or non-compliant work. Employers may reasonably worry that employees who have accepted gifts will — consciously or otherwise — fail to act in the organization's best interests. This is not to suggest that employees would neglect their duties simply because they accepted a gift; rather, it is a matter of assessing what those same employees might have done had no gift been offered. In a highly competitive environment, any compromise on quality is a serious concern (Balmer, 1998, p. 48).

Another significant concern is the likelihood of higher costs. In pursuit of better revenues, suppliers and contractors may use gift-giving to cultivate favorable relationships with employees. Sellers can be remarkably skilled at identifying the preferences of employees and offering gifts at well-chosen moments. An employee who has experienced such gestures may find themselves favorably disposed toward the donor, potentially resulting in the organization purchasing goods or services at above-market prices. This is not to claim that employees will blatantly favor gift-giving suppliers; rather, they may simply not make the extra effort to secure the best available terms. The incremental cost per transaction may be modest, but across multiple transactions in large, multi-location organizations, the cumulative impact can be significant.

Customer and Stakeholder Perception

Employers also worry that gift acceptance within one department could encourage a chain of favors extending to other departments. For instance, a purchase executive may seek to influence a quality control manager to overlook certain discrepancies. Furthermore, competing firms may exploit gift-giving networks — either directly or through suppliers and service providers — to gather intelligence on an organization's activities and strategies (Balmer, 1998, p. 50).

Employee Perception

Equally important is the perspective of customers — the very reason for the organization's existence. If customers become aware that employees are freely accepting gifts, they are likely to develop a negative impression of the company. Employers are acutely sensitive to this risk, as customer goodwill is fundamental to business success. While it might be argued that customers are primarily interested in price discounts and promotional offers, the broader reputational effect of perceived ethical lapses cannot be dismissed.

Employee gift acceptance may also affect how stakeholders evaluate the organization, particularly if such behavior damages its reputation and image. It is logical that stakeholders would distance themselves from organizations perceived as lax in administering ethical standards. Unethical practices among employees tend to undermine organizational performance over time, which is why employers strive to ensure that stakeholders have no grounds for concern regarding employee conduct — including the acceptance of gifts.

From the employee's perspective, accepting gifts is a perfectly normal activity. Several arguments support this view. To begin with, employees generally do not solicit gifts from suppliers; typically, it is the other way around. In many progressive organizations, suppliers and contractors are treated as partners who contribute to organizational efficiency and profitability. Just as sellers depend on buyers, buyers also depend on sellers — even if competitive market dynamics give buyers more options. An employee who declines a gift may inadvertently offend the supplier, potentially damaging the business relationship. From the employee's standpoint, there is a clear distinction between a gift and a bribe: when a seller offers gifts to a group of employees as a gesture of goodwill during a holiday season or special occasion, it does not constitute a bribe. It only becomes a bribe when a gift is offered to select individuals in exchange for a specific favor. As one perspective notes, an employee who publicly refuses gifts can just as easily accept bribes in private (Wood, 1995, p. 58).

Employees may also point out that organizations themselves are not above gift-giving in the course of business operations. At ports around the world, for example, small gifts to customs and port officials to expedite the loading or unloading of shipments are common practice. Many companies — including multinational corporations — host conferences and events for customers and distribute gifts. Pharmaceutical companies regularly give gifts to physicians as part of their marketing strategies. Organizations also offer freebies, discounts, and material gifts to end consumers to stimulate sales. If the organization's own gift-giving is accepted as standard business practice, employees may reasonably ask why their own receipt of gifts should be treated differently. From a personal standpoint, gifts carry symbolic value; they signal that the employee's role matters and that suppliers value the relationship. This can serve as a motivating factor, particularly in organizations where employees feel their compensation is insufficient (Hoang, 1997, p. 70).