Survey finds leadership failings on business ethics

Sporadic progress has been made in tackling bribery and corruption across Europe, the Middle East, India and Africa (EMEIA), but many senior managers are failing to set the right tone on business ethics according to EY.

The accounting and professional services group surveyed 4,100 employees from large businesses in 41 countries across the region and found that 51% of respondents still perceive that corrupt practices happen widely across business in their country.

EY’s report, entitled ‘Human instinct or machine logic – which do you trust most in the fight against fraud and corruption?’, also found 27% of respondents agreeing that it is common practice in their business sector to use bribery to win contracts, including 14% of respondents in Western Europe.

Senior management are failing to foster a culture of ethical behaviour finds the survey: 77% of board directors or senior managers say they would be willing to justify some form of unethical behaviour to help a business survive, with one in three willing to offer cash payments to win or retain business.

Nevertheless, 28% of respondents believe that regulation has had a positive impact on deterring unethical behaviour, an increase of 4 percentage points from the 2015 survey, with 77% of respondents agreeing that the prosecution of individuals would help deter fraud, bribery and corruption by executives.

Generation Y cohorts (aged 25 to 34), who constitute 32% of respondents, demonstrate more relaxed attitudes toward unethical behaviour the survey finds, with 73% stating that such behaviour is justified to help a business survive, compared with 49% of 45 to 54 year olds (Generation X) surveyed who hold this view.

Furthermore, 68% of Generation Y respondents believe their management would engage in unethical behaviour to help a business survive, and 25% of this age group would offer cash payments to win or retain business.

Generation Y also show a heightened distrust of their co-workers, with 49% believing that their colleagues would be prepared to act unethically to improve their own career progression, compared with 40% across all age groups.

“Despite positive signs of improvement in some emerging economies, more than half of respondents across EMEIA still perceive bribery and corruption as a major challenge,” said Jim McCurry, EY EMEIA fraud investigation and dispute services leader.

“Furthermore, there is worrying evidence of a lack of leadership from senior executives to tackle these issues, which may be negatively influencing the younger generation workforce.

“Companies need to take steps to create a culture in which it is in employees’ interests to do the right thing. Training and awareness programs can play a big role in helping individuals understand the consequences of fraud and corruption, and encourage them to come forward if they have concerns over unethical conduct.”

Reporting unethical behaviour

Although whistleblowing hotlines are now considered an important part of a company’s compliance programme, only 21% of respondents were aware of such a channel in their company, while 73% would consider providing information directly to a third party such as a law enforcement agency or regulator.

Moreover, 52% of respondents had concerns about misconduct within their organisation. Of those respondents, 48% felt pressure to withhold information, leading to 56% of this group choosing not to report.

Respondents in emerging markets such as India (27%) and Nigeria (24%) agree that they are now offered more protection to blow the whistle in comparison to three years ago. However, more limited improvement has been seen in developed markets such as Italy (11%) and France (4%).

McCurry commented: “For many companies, limited progress appears to have been made in providing an effective mechanism for highlighting wrongdoing. Employees are either unaware of the correct channels, or more worryingly, feel pressured to withhold information, which shows a lack of leadership from senior management to tackle the issue.

“Companies need to invest in effective whistleblowing channels and communicate appropriate processes to help ensure employees who witness wrongdoing know where to go.”

Monitoring employees’ data

The survey reveals a tension between the use of technology and the monitoring of employees’ private data. Seventy-five percent of respondents say their companies should monitor sources such as emails, calls or messaging services. Despite this, 89% feel monitoring data, such as instant messenger accounts, would constitute an invasion of privacy.

When asked if they support the routine collection and analysis of their data from email, telephone, security systems or the public record, respondents from Western (42%) and Eastern (49%) Europe were less supportive in comparison to India (87%) and Africa (80%).

“The threat posed by employees is very real but remains difficult to detect without gathering and analysing data from a variety of sources,” said McCurry. “By focusing on behavioural patterns and the use of unauthorised external storage devices, companies can identify individuals who may pose a higher risk.”

Of the 41 countries that participating in the survey, Ukraine was ranked first, against seventh in 2015, with 88% of respondents agreeing that bribery/corrupt practices were perceived as widespread across the country’s businesses. Cyprus (82%) and Greece (81%) were second and third respectively.

Croatia, which ranked first in the 2015 survey, was fifth this year with 79% of respondents agreeing that bribery and corruption was rife against 92% two years ago.

Of the major European economies, Italy ranked 13^th this year (71%), Germany was 25^th (43%), France 32^nd (28%) and the UK 34^th (25%). In 41^st place was Denmark, with only 6% agreeing that bribery and corruption was commonplace.

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