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Allegations that media tycoon Lord Black spent almost $50,000 of his company’s money on his wife’s birthday party – and that he and his fellow directors siphoned off tens of millions more for their own purposes – has raised eyebrows in many British boardrooms. The dividing line between corporate largesse and unbridled avarice can sometimes be unclear or forgotten.

The first base for any calculation about your legitimate business expense is your own income and lifestyle. It is reasonable to expect that when you’re going about your company’s business you will avail yourself of services broadly similar to those you normally enjoy. It follows that if you live in comparative luxury in the stockbroker belt, your everyday needs will differ somewhat from someone who lives on state benefits on a caravan site.

With this in mind, within reason, courts will usually conclude that you have not acted dishonestly when you expend the company’s money extravagantly in pursuit of a recognised business objective.

Pay packages represent much more thorny territory. If corporate luminaries have contractual arrangements in place that give them huge rewards in return for delivering for success, shareholders usually give their consent, grudgingly or otherwise. Problems usually arise when performance ceases to impress or even fails, but the rewards continue to roll their way.

As was the case with Hollinger Group, shareholders will eventually unseat those whose rewards they deem to have exceeded their abilities in the boardroom.

As recent events in the USA and elsewhere have shown, it is extremely difficult for the authorities to exert an external controlling influence on the affairs of very large, fleet footed international organisations. At this level, corporate governance is in the hands of the officers of the company. They are almost a law unto themselves, as the embattled top four accountancy firms will testify.

Again, there seems to be a sliding scale of acceptance of the level of perks that relates to a company’s size and stature. A small local plumbing business operating a racing stable as a loss making sideline for the directors’ enjoyment is likely be viewed differently from a major multinational dabbling in bloodstock investments.

Most directors understand the legal implications of their company paying for a car or cars, gold cufflinks, Saville row suites, expensive entertainment and international travel. If they don’t, their accountants probably will.

The authorities are much more likely to sit up and take notice when the ‘perk’ is an obvious indulgence of an outside interest. A rally car, powerboat, light aircraft or seagoing vessel, perhaps. If its only business justification is to carry the company logo to a real or hypothetical new audience, there could be a legal case to answer. On the other hand, corporate sponsorship of broadcast sporting events is seen as a perfectly proper promotional outlay.

The final issue to consider is the point at which a demonstration of corporate gratitude or encouragement becomes bribery. A £250 lunch with a £200 bottle of Premier Cru Burgundy, plus £50 for a taxi to the airport, could be ‘business as usual’ for a theatrical agent discussing a $5m film role for one of his West Coast clients. £500 in cash in a brown envelope handed to a materials buyer on a construction site negotiating the price of £5,000 worth of roof joists would be seen as blatant bribery.

Once again, it seems to depend on the sector, the circumstances, the size and proportionate value of the business under consideration, the income and lifestyle of the participants and the form the inducement takes.

Martin Cunningham is a criminal defence solicitor. He can be reached
on 0161 456 5857.