A former assistant sales manager of a wine company was fined $3,000 for corruption on 7 Dec 2020 for paying a $822 dining expenses for a former marketing communication manager of a Watch company for facilitating the sales of wine and champagne for the latter.
It is not unusual for businesses to pay performance related commission to employees, agents or third party to drive sales. As a business owner, it is important that you are aware of what are the do’s and don’ts for such payments.
Corruption is receiving, asking for or giving any gratification (eg money, sexual acts, properties, promises and services) as an inducementor reward for a person to do a favour (eg unfair business advantages, confidential information and other special privileges) with a corrupt intent. There are 3key determining factors in most situation of corruption: gratification, inducement, and corrupt intent. Whereas corrupt intent could be inferred in most situations, it remains a subjective mental state for both the giver and receiver at the onset of a potential corrupt behavior.
It would be easier that we look into what constitutes gratificationand inducement. The observable red flags are excessive gifts/entertainment and conflict of interest. We have seen in most cases of corruption, lavish or excessive gifts or entertainment are involved and/or with both giver and/or receiver in conflict of interest (eg personal vs company interest).
It will be clearer with the illustration from the corrupt cases below:
Gratification: excessive loans
Inducement: confidential information
Conflict of interest: receiver personal vs company
In 2011, Mr R, a defence contractor was charged for giving corrupt gratifications in the form of loans amounting to $53,100 to a captain in SAF in return for confidential information on military projects.
Gratification: excessive commission
Inducement: sales orders
Conflict of interest: receiver personal vs company
In 2001, an engineering Co, F paid a commission of US$17,500 to Mr N, Co T, to secure sales orders worth US$247,088.
Gratification: excessive commission
Inducement: sales orders
Conflict of interest: receiver personal vs company
In 2011, Mr T from W Seafood, paid commission of $200 to $24,000 to 19 chefs from well-known Chinese restaurants and hotels in Singapore to secure sales of seafood.
Gratification: bribe
Inducement: welder pass
Conflict of interest: receiver personal vs company
In 2014, Mr S from A Consultancy, received bribe of $5 to $50 in return for leniency in passing trainee for welding course.
Gratification: Commission
Inducement: sales orders
Conflict of interest: receiver personal vs company
In 2006, Mr L from CSM, received commission of $1,228,743 from 2 equipment suppliers of CSM.
Gratification: Gifts of watches
Inducement: car dealership
Conflict of interest: receiver personal vs company
In 2005, Mr S from P Motor, received gifts of branded watches worth $100,000 from T Co for appointing T Co as distributor of cars for P Motor.
Therefore, as a precautionary measure, gratification should not be made to any employee of the company from which you are getting the deal. This is to mitigate the risk of corruption arising from any conflict of interest situation.
