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Bribes in Business: What Small Business Owners Should Know

By George Khoury, Esq. on March 01, 2017 | Last updated on March 21, 2019

The business world is filled with unscrupulous people who are always willing to test the limits of decency and legality when it comes to making a buck. Bribery is one of those things that small business owners need to be cognizant of, as even trusted employees can be compromised, and innocent gifts misconstrued.

Although there are vaguely specific rules about what can be considered a gift, or perhaps a campaign contribution, or donation, businesses need to be careful that these are not construed as bribes. Furthermore, monitoring for employee kickbacks is highly recommended.

Bribery or Gift?

Businesses often send current clients and prospects gifts. While it is difficult to argue that these gifts are not meant to incentivize the client or prospect to bring you more business, bribes are more than just an incentive.

Typically, gifts to public officials from businesses need to follow strict rules in order to avoid the appearance of a bribe. For example, if a business makes a large campaign contribution, and is then later awarded a lucrative government contract by the official they helped elect, it's difficult to not see the impropriety.

Businesses also need to be careful when doing business abroad. Just because greasing the wheels of government might be an accepted and expected business practice, US law actually prohibits this conduct abroad.

Beware of Kickbacks

Kickbacks occur when an individual or business provides another with a portion of the profit gleaned from providing an unfair advantage. A frequently cited example of this involved Honda executives in the 1980s who provided certain car dealerships with preferred access to cars that sold faster in exchange for bribes. The Honda executives who accepted the bribes were actually convicted on criminal charges and had to serve time in jail.

However, kickbacks can occur on a smaller scale, and right under your nose, too. You should definitely be monitoring for kickbacks if you have sales people with authority to give discretionary discounts, or if you sell a product so in-demand that employees can be bribed for preferred access (think Tickle Me Elmo on December 20th).

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