Everyday ethics: Vendor kickbacks

As told to Susan Muldowney

Question: “A key supplier to my client is offering a personal kickback if I recommend renewing their contract without seeking competitive bids. The supplier’s rates are reasonable, but other potential suppliers might offer better terms. Declining the offer could strain my relationship with the supplier, which is crucial for the client’s operations.

The vendor says they have already spoken with my client’s CEO, who seems supportive of accepting the supplier’s offer without going to the market. Taking the kickback might be seen as aligning with the CEO’s wishes, putting additional pressure on me to comply. How should I navigate this?”

Answer: While the answer to ethical questions is not always black and white, from an ethical standpoint alone, the correct course of action in this situation is simple: accountants cannot accept kickbacks. However, how you navigate this scenario is not so straightforward. 

Let us first look at the issue of kickbacks, where vendors provide incentives such as cash, gifts or favours in exchange for preferential treatment. It does not matter how it is framed, how “reasonable” the supplier’s rates are or who else may have been consulted. A kickback is a direct threat to your integrity and objectivity, and it is unethical. 

Everything we are taught as professional accountants reinforces that point. The fundamental principles in APES 110 Code of Ethics for Professional Accountants — integrity, objectivity, professional competence and due care, confidentiality and professional behaviour — are not abstract ideals. They are meant to guide us through uncomfortable situations like this. 

Accepting a personal financial benefit for recommending a supplier would create a clear self-interest threat. It would compromise your objectivity, or at the very least, create the perception that your recommendation is biased. 

It is also worth considering a practical question: where is the money for this kickback coming from? If a supplier has enough margin to offer you a personal payment, why is that value not reflected in better pricing for your client? Why would a supplier offer such an incentive if they were truly offering the best possible terms? Those questions show that your duty is to probe further — not to quietly accept the arrangement.

The added complication here is the suggestion that the supplier has already spoken to the CEO, who appears to support the supplier unequivocally. That introduces pressure — perhaps even intimidation.

I have seen situations where a culture of aggressive revenue targets or “winning at all costs” makes individuals feel cornered. But pressure does not change principle. Your responsibility is to act in the best interests of your client’s organisation, not in your own financial interest, and not to align yourself with what you assume a member of the client’s senior leadership may want.

To navigate this situation, I suggest you take several steps. First, make it clear to the supplier that you cannot accept a personal kickback. That conversation may be uncomfortable, but it must be unequivocal. Leaving ambiguity only invites ethical erosion.

Second, explain directly to the CEO that a personal incentive was offered and that, in line with professional standards, you have declined it. Transparency protects not only you, but also the organisation. If the supplier’s offer is genuinely being considered, then any financial benefit should be reflected transparently in the contract — for example, as a discount to the company — not as a private payment to an individual.

Third, strongly recommend a competitive bidding process unless there is a compelling commercial reason not to. Without market testing, how can you be confident the pricing is fair and equitable? A kickback can easily mask the fact that better terms are available elsewhere.

Ethical decisions are rarely made in a vacuum. There may be fear of damaging relationships, losing supply continuity or even jeopardising your own role. In those moments, it is entirely appropriate to seek guidance — from a professional body, an internal ethics committee or a trusted senior advisor.

Your professional reputation is built over decades and can be damaged in an instant. No supplier relationship, no short-term convenience and certainly no personal payment is worth compromising the trust placed in you as an accountant. Your duty is to remain independent, to act with integrity and to ensure that the client’s interests — not your own — are always paramount.