by Jonathan T. Howe, esq. | June 01, 2007

In days gone by, hotel and venue contracts signed by corporate planners were pretty mundane. In that simpler time, legally speaking, agreements addressed the primary concern that the meeting would be canceled. Nobody worried about attrition, nobody was trying to figure out the event’s specific return on investment and nobody cared what the procurement department thought about the negotiations that had taken place.

We now are in a much more complicated age, when the corporate planner needs to look at far more in contracts than ever before. Part of this is due to the impact of the Sarbanes-Oxley Act of 2002, the law enacted to guard against scandals like the Enron debacle. Also known as SOX, the law requires careful accounting of all corporate costs, forcing planners to justify why each expense is incurred.

This change also forces corporate planners to deal with internal procurement departments who second-guess the careful negotiations planners have handled prior to signing the contract.

Black Sox

Sarbanes-Oxley requires publicly held companies to make sure the expenses incurred to hold meetings advance the profitability and interests of the shareholders. It has in no small part caused corporate planners and procurement departments to readjust their approach to contracts.

For example, the corporate planner now must include a clause consistent with the accounting department’s requirements for cost justification. By this, I mean the meeting contract must spell out the financial information the suppliers must provide so the CFO and/or the CEO will sign off on reports dealing with expenses related to meetings, travel, entertainment and the like.

In our agreements, we usually include a list of everything that must appear on the master bill, since every little item now must be justified, including why a limo was taken instead of a taxi.

Such a detailed agreement should help the meeting planner when it’s time to show the contract to procurement and legal for approval. If all those i’s already are dotted, you’ll encounter fewer hassles over the allocations.

Up the Ladder

The chain of authority also needs to be spelled out. Who has approval to make changes relative to conditions, a new meeting room setup, materials, etc.? It should be made very clear in the contract who has that authority on site.

Too often, some executive thinks he or she can incur an expense but actually has no authority to do so. Thus, the contract should be very specific about who can approve an expense, and it should specify that unless the correct person authorizes it, the expense will not be paid.

For all planners, even without Sarbanes-Oxley, this basic billing documentation is key. It will help in the next negotiation, when you can show what your meeting really is worth.

On the Lookout

Security factors, too, have become very important. But such details should be kept out of the contract.

The CEO, high-profile attendees, speakers and other VIPs might have specific security needs. The hotel contract might provide that a separate security agreement has been discussed and is acknowledged, but the details of it are not made part and parcel of the basic dates, rates and block contract.

The reason for this, obviously, is that the hotel contract will go through the hands of so many people on the property, from the sales department to catering, housekeeping and the front desk, so sensitive details need to be kept out of sight.

Jonathan T. Howe, Esq.,is a senior partner in the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., which specializes in meetings, travel and hospitality law. Legal questions can be e-mailed to him at [email protected].