Interviews

Ethical disconnect

by Mark Rowe

The UK is making progress in tackling fraud and corruption but there’s a disconnect between boardroom policies and impact on the ground;
regulators, boards, and enforcement agencies are still struggling to translate policies into improvements in ethical behaviour. This is according to the 2015 Europe, Middle East, India and Africa (EMEIA) fraud survey from the audit firm EY.

The bi-annual survey polled 3800 employees of large businesses in 38 countries, including 100 in the UK. It found that near half, 46pc of UK respondents thought the level of regulation in their sector had increased in the past two years. However only 15pc said it was having a positive impact on improving ethical standards in their company. Some 28pc of respondents in the UK also rated their own company’s ethical standards as ‘very good’, narrowly ahead of the EMEIA average of 26pc.

John Smart, Partner and Head of EY’s Fraud Investigations and Disputes team, said: “While progress has been made in the UK on tackling overall fraud and corruption, high-profile scandals, such as LIBOR and FX rigging, have thrust corporate ethics into the spotlight and highlights the need to ensure that the right behaviours and values are being fostered at every level of an organisation, from the boardroom to the office floor.

“Regulators and enforcement bodies, inevitably, have a huge role to play in helping organisations uphold integrity and ethics. However, policies are just one lever among many for managing fraud, bribery and corruption risks. Changing culture and behaviour is a difficult and long-term process.”

The survey showed that the majority of companies have been successful in implementing policies, rules and procedures to meet fraud and bribery challenges. These include training for staff, whistle-blowing hotlines and codes of conduct. However, it showed there is still room for improvement.

Six in ten, 60pc of those surveyed in the UK said their company has an anti-bribery or anti-corruption policy and code of conduct, but only one in four, 25pc said they had seen their company take action against employees for breaching them. But the biggest contrast between corporate policy and perceived reality on the ground was on whistle-blowing. Some 79pc of UK respondents said their company had a whistle-blowing hotline, but just 28pc said management always followed up on whistle-blower reports – below the EMEIA average of 32pc.

John added: “It appears that UK employees have heard it all before on anti-bribery and anti-corruption issues and are lacking faith in senior management to clean up. The whistle-blowing statistics are particularly alarming as employees are at their most vulnerable when they choose to uncover misdemeanours within their ranks. Failing to follow up on whistle-blowing allegations can seriously erode trust in an organisation’s ability to tackle fraud and corruption.”

UK improving

While there are differences between companies’ policies and reality, the national picture shows that the UK is performing well on anti-graft measures and practices. Some 27pc of UK respondents thought bribery and corrupt practice were widespread in their own country, but this was down from 37pc in 2013 and compared to an average of 51pc across EMEIA. Regulation is also having an impact in some areas. Only 5pc of UK respondents in this year’s survey said that offering personal gifts would be justified to help their business survive. This was down from 19pc in EY’s survey in 2013.

John added: “The UK appears to be ahead of other European states in its approach to confronting fraud and corruption. It is therefore important not to lose sight of the positive effect that legislation, such as the 2010 Bribery Act, is having in driving out explicit acts of bribery and other illicit practices. In order to meet the corporate ethics challenge, boards will need to supplement their anti-fraud, bribery and corruption polices with consistent messaging from the top, together with the right enforcement, rewards for whistle-blowers and highlighting role-models.”

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