The U.S. Travel Association and other travel industry groups on Monday announced "new model standards for business meeting, event and incentive travel ... intended for adoption by companies" that receive emergency federal financing, but available for use by all companies.
The groups proposed self-regulation measures as an alternative to actions contemplated by the U.S. Treasury and two embryonic congressional bills. The federal initiatives seek to establish policies, visibility and accountability on travel expenditures and other items among the (mainly financial) firms that during the past few months have received hundreds of billions of dollars in taxpayer assistance. This includes the federal government's Troubled Asset Relief Program and Capital Purchase Program, in which participating firms sold some stock to taxpayers in exchange for bailouts, as well as the "exceptional" bailouts of AIG, Bank of America and Citigroup.
The travel trade associations also are concerned about the potential for such requirements to spread to firms that have not received federal assistance, as well as what they described as a media-fueled retraction in "legitimate" meeting and conference activity.
According to the model policy, which can be downloaded here from USTA, "each proposed meeting, event or incentive/recognition travel with a cost exceeding $75,000 must be supported by a written business case identifying a specific business purpose. Total annual expenses for meetings, events and incentive/recognition travel shall not exceed 15 percent of the company's total sales and marketing spend. The process for approving meetings, events and incentive/recognition travel, and the procedures for assuring adherence to this policy, will be subject to independent audit to confirm policy adherence."
Other guidelines also apply, and a list of "legitimate" business purposes for meetings, events and incentive/recognition travel--which should be held to "strengthen the competitive position of the company in the marketplace and position the company for the creation of long-term value and growth"--includes: product launches; sales conferences; training and staff development meetings; employee recognition programs; professional conferences for networking and education; performance incentives with "clear rule structures"; user conferences; product development events; corporate-sponsored charitable events; trade shows; financial planning and review meetings; and employee meetings as a result of company mergers and/or acquisitions.
Maritz Inc. helped develop the document, which was also supported by the American Hotel and Lodging Association, Destination Marketing Association International, International Association of Exhibitions and Events, Meeting Professionals International, National Business Travel Association, Professional Convention Management Association and the Society of Incentive Travel Executives.
Asked during a press conference call to list events that would be considered illegitimate, U.S. Travel Association president and CEO Roger Dow said he was "hard pressed, and I'm not being foolhardy on this, to think of non-legitimate events. Yes, I think when a group of people might get together from a senior-member organization and go out on a hunting trip where no business is expressed, that's probably not legitimate. But the 12 categories that we list as [legitimate] business expenses represent 99 percent of the [events] that take place."
Sen. Dianne Feinstein (D-CA) early last month criticized AIG's spending on lobbying, spa and hunting trips--and "cocktails and limousines" at a seminar--as she introduced a related bill that remains in committee.
"One would think that a brush with collapse and total failure might have a sobering effect on some of these firms," Feinstein said. "But this penchant for wasteful junkets in the face of complete failure was not unique to AIG. Following enactment of TARP, news reports have uncovered multiple instances in which rescued firms have been caught making unnecessary and outrageous expenditures, leading many taxpayers to question why these firms are receiving federal assistance in the first place."
USTA's Dow said "recent media coverage and a spate of regulatory and legislative activity have driven many businesses--not only those that have taken money from the federal government, but many others that have not--to cancel planned and future meetings. When that happens, bellmen, maids, wait staff and other hourly wage employees are the first to lose their jobs as meetings, events and travel incentives decline."
The U.S. Treasury on Wednesday requiredinstitutions that benefit from "exceptional" federal assistance--namely AIG, Bank of America and Citigroup--to adopt company policies on "any expenditures related to aviation services, office and facility renovations, entertainment and holiday parties and conferences and events," according to a statement. "This policy is not intended to cover reasonable expenditures for sales conferences, staff development, reasonable performance incentives and other measures tied to a company's normal business operations. These new rules go beyond current guidelines, and would require certification by chief executive officers for expenditures that could be viewed as excessive or luxury items. Companies should also now post the text of the expenditures policy on their Web sites."
According to AH&LA director of legislative communications Robert Baylor, "The Treasury guidelines were seen as a potential revenue cut for the industry, so we reacted quickly and devised a set of model board of director guidelines for meetings for companies operating under TARP restrictions. It was felt that our industry should release a consensus guideline on these business events, rather than Treasury or Congress--neither of which have the level of expertise the industry possesses to properly address any rule affecting governance of meetings, conferences or travel incentives."
Feinstein's bill had called on Treasury to "develop and publish corporate governance principles and ethical guidelines for recipients of emergency economic assistance including restrictions governing: the hosting, sponsorship, or payments for conferences and events; the use of corporate aircraft, travel accommodations and travel expenditures; expenses relating to office or facility renovations or relocations; and expenses relating to entertainment, holiday parties, employee recognition events, or similar ancillary corporate expenses."
The U.S. House of Representatives, meanwhile, is mulling a bill that also addresses travel spending along with lobbying expenses, executive pay and sponsorships for the companies receiving financial assistance. The Feb. 4 bill, introduced by Rep. Elijah Cummings (D-MD), calls on TARP beneficiaries to post to their Web sites total monthly spending on travel, "including reports on expenditures on each of the following: plane fares, rental cars, hotel expenses, food purchases and any other expenses incurred by corporate employees during travel." Other items that would require disclosure include lists of dates, locations and expenses for "corporate events, including retreats, conferences, planning sessions, and office parties," as well as ownership and use of corporate jets.
"While moderating expenditures by taxpayer-aided companies is warranted, federal regulation and sensational coverage has created a paralyzing environment where companies are unwilling to travel or to meet for legitimate business practices," USTA's Dow said Monday. "Many prudent companies already have similar policies in place to ensure that travel expenditures are reasonable, justifiable and verifiable. These standards are designed to ensure that all companies that have taken emergency government lending have similar standards.
"As we speak, the folks associated with our organizations are on Capitol Hill and are carrying these regulations and guidelines to the Treasury department and our elected officials," Dow continued. "Each association is distributing these guidelines to their members. Our friends at the U.S. Chamber of Commerce will share this with various businesses. The American Society of Association Executives will share this with their large contingents of so many of America's associations beyond the travel and tourism industry."
The organizations also are undertaking a public relations campaign. At an MPI conference Sunday, Dow said, "We have to strike the words boondoggle [and] junket from the media's vocabulary."
USTA said "business-related travel generates 2.4 million American jobs, $244 billion in spending and $39 billion in tax revenue at the federal, state and local level."
Not a co-signer of the USTA-led guidelines, ACTE last week said it supported the Senate bill's goal of more transparency into the use of taxpayer funds by TARP recipients, but questioned a "blanket restriction" on the money's use for travel, lodging or corporate aircraft. The group recommended that legislation "clearly define more appropriate travel restrictions, such as prohibiting the use of these funds for meetings of a congratulatory nature, or accommodations that do not reflect the new spirit of thrift and fiscal prudence that can save jobs. It appears that certain aspects of [the bill] may be trying to supersede basic travel policies regarding the expenditure of emergency taxpayer bailout funds. The spirit of not wasting taxpayer resources is clear in this bill, but it should not just write off one of the most efficient means for companies to rebound--business travel."
"We are very concerned about Congress or the U.S. Department of Treasury becoming the nation's corporate travel or meetings manager," NBTA wrote in a memo to members. "That is your job!"
NBTA executive director Bill Connors indicated that an alternative to self-regulation would be "to have Treasury bureaucrats dictating travel policy to corporations. I believe this moment is to travel and strategic meetings management what the Sarbanes-Oxley debate was to the corporate accounting world. Regulations coming out of this debate may spread beyond TARP corporations, and that may be good for all of us if we act now to do what we do best--manage travel smartly."
After the bank rescue plans took effect beginning in October, demands grew for accountability and tracking the funds provided by the federal government. According to Sen. Feinstein, "The economic rescue legislation passed in October includes several oversight boards and accountability provisions to ensure that public funds are effectively distributed. But, it does not include any reporting requirements for firms that receive federal dollars. This is a significant omission, especially given the amount of federal money that some firms are receiving. When you add up all of the taxpayer dollars put on the line--from $30 billion provided to Bear Stearns in March, $200 billion available to Fannie Mae and Freddie Mac, $150 billion to AIG, $700 billion for TARP, plus the direct lending programs at the Federal Reserve--we are talking about well over $1 trillion federal dollars. I certainly don't think it is unreasonable for the public to know how their money is being spent."
According to The Wall Street Journal, 362 companies have received $195 billion (not including the "exceptional" $85 billion granted to AIG, Bank of America and Citigroup). Nearly three-quarters of the non-exceptional distributions went to ten firms: Bank of America ($25 billion), Citigroup ($25 billion), J.P. Morgan Chase ($25 billion), Wells Fargo & Co. ($25 billion), Goldman Sachs ($10 billion), Morgan Stanley ($10 billion), PNC Financial Services ($7.6 billion), U.S. Bancorp ($6.6 billion), Capital One ($3.6 billion) and SunTrust Banks ($3.5 billion).
Executives with several of these beneficiaries will meet this Wednesday with the House Financial Services Committee to discuss their use of the funds.
American Express received $3.4 billion as part of the program.