Christine Duffy
Now that the U.S. Department of Treasury issued for public comment until Aug. 14 its interim final rulethat among other things requires companies benefiting from Troubled Asset Relief Program funds to adopt an "excessive or luxury expenditures policy" on events, entertainment, aviation and travel, Management.travelasked Maritz Travel president and CEO Christine Duffy to discuss the proposed rules. Primarily about executive compensation, the rules also cover governance, including standards on meetings. Duffy earlier this year helped the U.S. Travel Association spearhead an industry campaign to educate politicians and the public of the value of meetings and events to business sales, strategies and objectives. Meetings and incentives came under attackas reports surfaced about some meetings TARP recipients held. Part of the campaign included a model board policyfor approval of meetings, events and incentive travel, and examples of legitimate business purposes for meetings. "I'm not aware of anyone that has specifically embraced the model policy," Duffy said. "In a lot of ways, the policy itself is easier to establish in a company. The bigger hurdle is if I have a policy, I have to have a way to implement it immediately across the enterprise. As you see from the interim rule, the CEO and the CFO have to certify within 90 days of the fiscal year that they've lived into that policy. That's a big deal." Additional excerpts of the discussion follow.
Are Treasury's interim final rules what you expected?
With the work that we had done with the U.S. Travel Association in lobbying and advocacy, we expected that Treasury would not be overly prescriptive in the guidelines they issued--and they weren't. We actually see that as a positive. Had they been overly prescriptive it would be more difficult to really manage in terms of the limitations they might put on TARP recipients. These guidelines, after all, are for those that received TARP funds. The one area that we are concerned about is this use of "excessive and luxury." That terminology keeps coming back. In a lot of ways it's very unfair to link meetings and events to "excessive, egregious and luxury" and tying it back to how this all started with senior executive perks and compensation. We'd like to see more separation there.
How do you think that separation could best be achieved?
This is work that really has to be done by the industry, meeting professionals and companies like Maritz that really want to help organizations and clients develop written policies. Ultimately, that's what is being asked for here. You must have a written policy that your board of directors approved and then you must manage against that policy. If you're a TARP recipient, it's not an option. The policy the industry put out in January is supportive and still an effective model policy for TARP-recipient companies, based on what Treasury just issued. Companies need to focus on what policy should be put in place in order to be comfortable that any meeting, event or incentive is appropriate for the business outcome they are trying to achieve. If we get back to the reason we have these in the first place, it may be very appropriate that some meetings are held at a resort or in an international destination, and there may be other meetings that are most appropriate to be held virtually. But I don't think we want anybody--whether a company or certainly not the government--to try to define luxury and make this a black and white issue, because it's not. That's why we were pleased that Treasury--even though they continue to use this "excessive and luxury" terminology--didn't try to define it.
What percentage of companies actually have board-approved meeting policies that define acceptable reasons for meetings, travel, entertainment and events?
I don't know the answer, but it's not the majority. I think the majority of major pharmaceuticals have that in place. What we're seeing now is interest from financial services; clearly technology companies, because they just have so many meetings and events; and a lot of the consumer brand organizations. We believe strategic meetings management programs are going to be embraced by more companies. It's also why we see in the pharmaceutical industry, where they have a lot of programs in place, they have policies, they're able to manage to them and overall they have not had the level of cancellations that we've seen from the other sectors. They are more comfortable continuing to operate programs because they have a way to distinguish what is appropriate and what is not based on the outcomes that they're trying to achieve.
How do you audit compliance to the policies?
The work we do in a strategic meetings management program provides that, which is why the pharmaceutical industry has pretty much embraced that as a best practice. That's why we have an SAS 70 review ( an auditing standard) on the Maritz process for SMMP. You need to have the policy issued by the company to basically say that every meeting, event and incentive program is registered centrally. The processes for how you manage that are flexible, but ultimately all of the data has to come back to one place and be reported on in a way that supports your policy. There are also cost-savings and cost-avoidance measurements that are now included. We also are moving to capture data on virtual meetings. We're seeing a lot more activity in companies either wanting to conduct virtual meetings in place of some face-to-face events, or more so integrating virtual into a live face-to-face meeting so fewer people go to the live event, or moving to a regional structure. Being able to capture what is the cost savings of doing all this is important. We also think with the focus on carbon footprints, people will want to be able to track, capture and measure that. Inside of this whole strategic meetings management programs, those are the kinds of services we'll be offering through MaXvantage.
How do you calculate cost savings on virtual meetings?
If I take what was a national meeting and put it out regionally, I'm probably saving 25 percent of the budget just by not flying people. But it has to start with what is the business objective to determine if virtual make sense or not; we're trying to get people to think about all of this more holistically. If I'm looking out over the next 12 months of a budget, how much of my interactions need to be face to face, and how many can be virtual to sustain messaging in between events, or even before an event, to prepare participants for what you want them to get at a meeting? There is still a big focus on cost savings right now. In this economy, corporations want a better way to manage something, to leverage volume, be more efficient and track cost savings. Many meeting planners will talk about "I saved X on this meeting, Y on that." But there has to be process where all of those savings are rolled up. The finance organization also has to agree that what you're calling cost savings is really cost savings, not cost avoidance. We've seen that differ from company to company. My view is that it doesn't necessarily have to be the same answer across the world. But it's making sure that inside your organization you've got alignment with finance on how they define it. Additional Resource: Click here to view or comment on the interim final Treasury rule.