Team VADA eViews
The Digital Newsletter of Your Virginia Automobile Dealers Association
August 2008
From time to time, we get questions about payments by suppliers to dealership employees who purchase products or services for the dealership. Dealers ask about action that can be taken against the supplier.
Controlling this problem by focusing solely on the supplier is the wrong answer. Generally, unauthorized supplier payments to employees result from the failure of the dealership to have solid contracting policies and processes in place.
Contracting Policy
We have written frequently about the need for a supplier contracting policy. A sound contracting policy limits the number of dealership executives that may negotiate for and enter agreements. Spreading the right to sign acquisition contracts throughout the dealership encourages certain suppliers to believe that they can buy business by paying dealership employees.
Oversight of the Contracting Policy
No contracting policy works effectively unless it is administered. That job must fall to the general office of the dealership through oversight of payables. All payable requests must be appropriately authorized by a company executive, except for limited expenditures within guidelines properly authorized. No regular monthly payments should be set up and paid unless there are supporting contracts that were entered in accordance with the dealership’s contracting policy.
Code of Ethics
We have written repeatedly about the importance to dealerships of a code of ethics. This should be included within the dealer’s handbook. One important provision of a code prohibits employees from receiving payments unless payments are made through or are approved by the dealership. Here is a simple example of an employment provision:
Employees are not allowed to realize personal gain from employment with the Company other than salary and benefits paid by the Company. Unethical or questionable practices for additional personal gain, even in the belief that they will benefit the Company, regardless of degree, will not be tolerated. Employees engaging in such actions will be subject to disciplinary action up to, and including, termination.
Naturally, a dealer who makes the business decision to permit occasional gifts of cookies or other small items can establish that exception to this rule.
Supplier Notification
Despite these efforts, suppliers may attempt to entice your employees through improper payments. If your contracting process is in place, the employees will have to go to senior management to establish new agreements. When you are receiving employee pressure to change a supplier or to develop a new supplier, a simple letter to the supplier notifying it of your policy and asking the supplier to send you a written affirmation that it is not providing anything of value to your employees can be a valuable tool in policing those activities.