Do Leaders and Credit Cards Mix?

If a CEO is flashing the plastic, is he improving morale?

When I speak of leaders and credit cards, I am of course talking about the way in which senior managers rack up expenses during the course of business, paid for by the ever popular business credit cards, whether they’re an Amex, Mastercard or VISA, the affect is the same.

Why are company credit cards used?

Credit Cards are often offered to senior managers because they allow them to get on with their job without having to worry about using up their own cash (or having cash difficulties) in paying for business expenses that will be ultimately paid back by the company. These pieces of plastic also give prospective clients the impression that the company is very generous and willing to spend whatever it takes to win their custom. It comes as now surprise then, that these credit cards are associated with the wining and dining of clients, and smoozing in general. Not a brilliant image from the point of view of employees.

Are There Downsides?

Especially employees who would have their own applications for a credit card flatly rejected based on their position and rank. As a result, company credit cards can, and often do, become the source of tension between lower and upper management, further crystalising a ‘them versus us’ culture.

The credit cards also encourage over-indulgance. The same greed that is often cited as the cause of the credit crisis and late recession – a topic that is still on the minds of the public, your employees, and even your clients. To be using a company credit card in a luxurious or indulgent manner is to make the statement that ‘We are financially strong even in a recession’, which could have both positive and negative effects.

The positive signalling effect is clear – clients wish to place their business with providers whom they believe with still be around next year. However employees who may have survived a recent round of redundancies may be shocked and disgusted if they see a manager paying for a 4 or even 5 star hotel with their company credit card. While many business indulgences are actually necessary to create a brand image and encourage a client or customer to buy; excess can lead to a mis-balance of the priority of brand image, versus the raw budgetary restrictions of a company.

What’s The Solution?

An extremely professional approach should be taken with credit cards. It can be very difficult to remain formal and strict with senior managers, because of the company’s desire to keep them happy. But in tough times, everyone must bare sacrificies, and the flamboyance with VISAs should be curtailed as part of an overall re-evaluation. All expenses should be subject to audit, and the threshold for audits should be at an amount no greater than £20. Even £15 items purchased by credit card, can, in reality be wasteful and sending out the wrong message.

Article Written By Simon Oates December 2009

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