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Comparing Current and Future Buyers' Views on Gift and Gratuity Acceptance

Author(s):

Gregory B. Turner, D.B.A.
Gregory B. Turner, D.B.A., Assistant Professor of Business College of Charleston, Charleston, SC 29424, 843/953-8036, turnerg@cofc.edu
Mark F. Hartley, D.B.A.
Mark F. Hartley, D.B.A., NAPM-Carolinas Virginia Chair in Purchasing College of Charleston, Charleston SC 29424, 843/953-5955, hartleym@cofc.edu

84th Annual International Conference Proceedings - 1999 

Abstract. Recently, gift and gratuity acceptance has been rigorously studied, primarily as it impacts buyers and vendors. But relatively little attention has been focused on the views of future purchasing professionals. This study compares the views of both current practitioners and business school students concerning gift and gratuity acceptance.

The Background. The study of ethics in general has a significant and rich history. However, the study of business ethics is a more recent endeavor, with the majority of the interest in the subject emerging over the past three decades. Numerous reasons are given for the increased interest in the subject area. Extended news coverage of questionable ethical and legal dealings in business add to the concern. Examples include cases of industrial espionage, insider stock trading, false and misleading advertising, faulty products, and fraudulent business practices in general.

It has been argued in many forums that purchasing is the business function most open to ethical abuse, due generally to the need to form complex relationships with suppliers and other departments within the firm. But perhaps more importantly, purchasing is the gatekeeper of an organization's bottom line. It is exactly this fact that opens the purchasing professional to a world of unsolicited offers for personal gain, a maze of gifts and gratuities from vendors to influence a purchase decision. Clearly, ethical behavior within the profession is imperative due to the function's direct impact on bottom line profitability. But as the profession has evolved from the old days as a clerical function to today's setting where purchasing sets at the strategic planning table, has the ethical behavior of the purchasing professional evolved as well?

According to the American Heritage Dictionary, ethics are the principals of right conduct or moral philosophy, or the rules or standards governing the members of a profession. Ethical business behavior may therefore be described as the use of recognized social principles of trust, justice, and fairness in decision making within business transactions. The difficulty for most employees lies in the gray areas of business transactions not covered by law. To make matters even more difficult, individuals posses different social and cultural backgrounds. Unfortunately, conduct that may appear ethical to one employee may be viewed in a near opposite fashion by another.

Within the purchasing function, nothing typifies this gray area and individual differences of opinion more than the question of accepting gifts and gratuities from vendors. Past studies concerning this practice have concluded that a uniform definition of what is and is not considered acceptable behavior cannot be formed. However, these studies do serve the purpose of allowing purchasing professionals to compare their behavior with others within the profession. This comparison allows buyers to determine whether their personal ethical codes are in line with others in the profession. To that end, this study attempts to serve this purpose as well as give a glimpse into the future of the profession. The study will compare the views of business students to views found in previous studies utilizing purchasing practitioners regarding the acceptability of various gratuities offered by vendors.

As mentioned above, there are many concerns regarding the ethicality of various business practices. Despite these concerns, many of today's university students are choosing business administration as a course of study with the intent of pursuing meaningful careers in business. According to the latest figures, nearly twenty five percent of all college students nationally major in business. Clearly business students represent an important population of study regarding business ethical issues. While is very difficult if not impossible to predict that any one particular student will emerge as tomorrow's "business leader," it is certain that many will emerge from this group.

Students, Gratuities, and The "Real World". This study attempted to create a real world setting in a college classroom. Students in upper level Principles of Marketing courses were selected as the target population. This course is required of all business students and is thought to be representative of all majors in a typical Business School. Regarding academic major, 27% of the respondents were majoring in marketing, 23% in accounting, 7% in general business, 13% in finance/economics, and 11% in management/information systems, with the remaining 19% in other majors. Roughly two-thirds of the students were male, and 47% had previously taken an ethics course in college. Over half of the student respondents reported having at least a "B" average while in college.

Each student received a questionnaire regarding purchasing and gratuity acceptance. To encourage their participation, every one who completed the questionnaire was eligible to win a $25 cash stipend. The questionnaire was developed over the years from conversations with NAPM members, a continuous review of the literature, and numerous previous surveys concerning gift and gratuity acceptance by the authors and other purchasing professionals. The questionnaires were randomly distributed to 250 Principles of Marketing students. In all, 237 completed and useable questionnaires were returned.

Findings of the Student Study. The final results indicate that none of the items listed on the questionnaire were viewed as acceptable by the majority of the student respondents. However, several of the items were judged by the respondents as more acceptable (i.e., not to involve an ethical conflict when offered by a vendor) than others (see Table 1 column A). Over twenty percent of the student respondents agreed that the acceptance of advertising souvenirs did not involve an ethical problem. Eleven percent of the respondents agreed that the acceptance of holiday gifts did not involve an ethical problem.

Additionally, twenty-three percent of the student respondents agreed that the acceptance of lunches did not involve an ethical problem. Likewise, accepting trips to vendor plants and accepting dinners from vendors did not involve ethical conflicts for twenty-three percent and nineteen percent of the student group respectively. Accepting food and liquor did not involve an ethical conflict for sixteen percent of the student group, and fourteen percent found that accepting tickets to sporting events from vendors did not involve an ethical conflict.

However, the results also indicate that many of the favors or gifts were overwhelmingly found to involve an ethical issue when offered by vendors. None of the respondents, regardless of which study cited, agreed that vacation trips, loans of money, large appliances, small appliances, or automobiles were acceptable items. Clothing was acceptable to only one percent of the student respondents while discounts on personal purchases were acceptable to only seven percent of the student respondents. Golf outings were acceptable to only nine percent of those respondents.

TABLE 1: COMPARISON OF VARIOUS GIFTS AND GRATUITIES

(Results shown as percent of respondents viewing the item as acceptable)

TYPE OF GIFT/GRATUITY A B C D E F G H I
Advertising Souvenirs 22 29 19 69 30 54 80 73 92
Automobiles 0 0 0 -- 0 -- -- 1 1
Clothing 1 5 0 6 16 0 -- 7 3
Dinners 19 38 10 22 79 8 -- 48 70
Discount on Personal Purchases 7 11 5 9 18 15 -- 11 21
Flowers -- -- -- 11 -- 0 -- -- --
Food & Liquor 16 31 5 49 40 0 36 30 29
Golf Outings 9 26 5 2 57 0 -- 28 47
Holiday Gifts 11 27 17 29 56 0 -- 43 30
Large Appliances 0 0 0 -- 0 -- 2 1 1
Loans of Money 0 0 0 -- 0 -- -- 1 1
Lunches 23 47 24 36 93 23 80 68 90
Small Value Appliances 0 2 5 0 6 0 6 6 6
Tickets (Sports, Theater, Etc.) 14 28 5 13 59 0 42 37 60
Trips to Vendor Plants 23 39 11 42 48 0 -- 31 51
Vacation Trips 0 0 0 0 2 0 4 2 2
  1. = 1998 COLLEGE STUDENT SURVEY
  2. = 1995 -1997 NAPM INTERNATIONAL CONFERENCE INFORMAL SURVEYS
  3. = 1994 STATE OF SOUTH CAROLINA STUDY
  4. = 1994 STATE OF ALABAMA STUDY
  5. = 1992 NAPM-CV REGIONAL SURVEY (Turner, Hartley 1992)
  6. = 1990 STATE OF ARIZONA STUDY (Forker 1990)
  7. = 1990 PURCHASING WORLD READERS POLL (Modic 1990)
  8. = 1988 NAPM AND ERNST & WHINNEY SURVEY (Janson 1988)
  9. = 1979 NAPM AND IIT SURVEY (Anjou 1979)

Discussion and Conclusions. It is significantly difficult to draw a line between what is and is not appropriate. The vast gray area between proper and improper behavior is readily apparent in the results of this study. A general conclusion that may be drawn from these results are that certain gifts or favors may be considered a cost of doing business for the vendor while others may be considered an outright bribe. For example, purchasers may view the acceptance of lunch or dinner as being more ethical than expensive vacations or tangible gifts simply because business may be discussed over lunch or dinner.

When presented with a gift or favor, a buyer should ask his/herself why the salesperson is willing to spend their company's money. Even in the guise of creating goodwill, the salesperson is spending money in hopes of generating some future return. It has been suggested in numerous studies that the best remedy for alleviating this uncertainty is a "no gift" company policy. Regardless, buyers should rely on their organization's ethics policy and their own common sense when uncertain of the intent of a gift or favor.

These results may also be used as a benchmark for purchasing managers to compare the behavior of their employees to those of others within the purchasing profession. If a comparison reveals that one's personal behavior varies significantly, perhaps steps should be taken to bring behavior more in-line with the majority consensus. This may eliminate the possibility of your purchasing department getting the stigma of operating an unethical operation. Clearly communicating the organization's policy concerning this issue to both buyers and suppliers should result in a healthier climate in which to build beneficial long-term relationships.


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