One of the most important things to do to protect your reputation when running an organization, no matter the goal of the organization, is to avoid giving or receiving bribes. Common sense tells us to avoid flat-out bribery. The bribery that most people think of is two people in a back alley, one handing over money, and the other saying, “It’ll get done.” The kind of bribery I’ve just described is the stuff of movies. What businesses and individual people need to look out for is something called undue influence.
What Exactly Is Undue Influence?
Undue influence occurs when one individual or party persuades a different individual or party to make certain decisions. These situations arise when one of the parties has a considerable amount of power over the other, and they can wield it in a convincing way. All undue influence isn’t bribes, but all bribes are undue influence. Confusing? Let’s look at a better explanation.
Example of Undue Influence:
Undue influence is difficult to comprehend in the abstract, so a concrete example is best. Bert and Ernie work together in a contracting company. Bert is Ernie’s boss. Ernie is a hard worker, and always does his best. Bert also runs a contracting side business, where he spends his weekends building treehouses for kids. Ernie has two kids, but they’ve never shown any interest in a treehouse.
Bert spends his work days convincing Ernie that he need a treehouse for his kids. Ernie and his kids don’t want one, but Bert is persistent…and again, he is Ernie’s boss. In the end, Bert convinces Ernie to spend money he didn’t want to spend on a treehouse that his kids didn’t want. Ernie’s money has been spent, space in his yard has been taken up, and Bert has benefitted from using his place of power to coerce Ernie into paying him for a service. Did Bert bribe Ernie? Not directly. Did he use undue influence to get what he wanted? Yes, he did.
Undue Influence in the Real World:
Bert and Ernie aren’t real, but undue influence certainly is. Undue influence can occur between many different parties, and that is part of what makes it so complicated. Undue influence may occur between parents and children, doctors and patients, attorneys and clients, a government and its citizens, and, of course, two businesses. These examples all make very clear who the stronger and weaker parties are, except for one: the two businesses example.
Companies may use their place of power to push smaller businesses, or weaker individuals, into agreements, contracts, or any other deals that are being forced on the weaker company. A business can coerce a partner business into a contract using false promises, misleading information, fake statistics, fraud claims, threats or more.
The Effects of Undue Influence:
The effects are simple. If your employees are exercising undue influence over others, they are putting your reputation and possibly your contracts at risk. Your organization may also face legal consequences. If your employees are being unduly influenced, your bottom line is at risk, whether due to selling goods or services below market rates, buying goods or services above market rates or otherwise making poor decisions.
How to Avoid Undue Influence:
Avoiding undue influence is much more difficult than avoiding a simple bribe. In the back-alley bribe scenario, you simply don’t offer or don’t accept a bribe. Avoiding undue influence requires that your employees be aware of the situations that can cause it. Additionally, look out for false ‘facts.’ If you believe someone to be misrepresenting facts or statistics to you, check them out yourself. Vet all research. If you believe someone with power over your employees, whether their manager, your client or your supplier, train your employees speak with a ranking person within your organization or report it to the Red Flag Reporting hotline.
If you don’t realize you have been the victim of undue influence at the time, don’t worry. Business law states,
“When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit there under, upon such terms and conditions as the court may seem just.”
In layman’s terms, you, your assets, and your organization may be protected here. Do not hesitate to take action. If someone misrepresents themselves, pushes you into something you did not have all the facts for, or otherwise causes your organization a disservice, do not take it laying down.