Growing pressure to deliver results for investors and owners is causing a high number of company executives to cook the books and turn a blind eye — or worse — to fraud, bribery and corruption. The finding comes from consultants Ernst and Young’s latest annual survey of fraud in Europe, the Middle East, India and Africa. “An alarming number appear to be comfortable with” this unethical conduct, writes David Stulb, who heads E&Y’s Fraud Investigation group, in an introduction to the results of this survey of more than 3,000 board members, executives and managers across 36 countries.
Some highlights:
- 42% of board directors and senior managers are aware of some type of irregular financial reporting in their company;
- 57% of respondents feel that corrupt practices are widespread in their country — in fast-growing markets, that number rises to 67%;
- 49% of sales staff do not consider their company’s anti-corruption policy to be relevant to their work.
The results raise troubling questions about deteriorating business ethics in general, and about company’s anti-corruption compliance programs in particular. The findings suggest that compliance programs are less effective than senior management thinks they are, that line managers see such programs as less and less relevant to their work, and that more and more are seeing them as brakes on competitiveness.
The pressures on individual managers to take unethical shortcuts to get results are not easing, and, as the survey points out, are being felt more acutely by individuals watching their pay packets get squeezed. At the same time, governments and regulators around the world are sharpening their focus on corporate and individual misconduct. Banks, to name one group, have been hit with billions of dollars in fines for unethical conduct from rigging interest rates to money laundering.
This survey suggests that attitudes towards unethical behavior are not limited to a few bad apples. Boards and top management have to ask more tough questions, be ready to look under more rocks and crack down harder on unethical practices when they find them if they are to protect their businesses from the risk of being corroded from within.
