Our survey finds employees frustrated with management’s tolerance of unethical conduct.
European companies complacent about rising fraud and corruption risks London, 18 May 2011 – Ernst & Young’s 2011 European fraud survey shows that more than a third of employees polled at large companies across Europe are prepared to offer cash, gifts or entertainment to win business and nearly half are not aware of an anti-bribery policy at their company. Employees in Greece (44%) and Russia (39%), for example, are most likely to pay cash bribes while those in Norway (6%) are among the least likely. Overall, two-thirds acknowledge bribery and corruption are widespread in their country and 40% say the problem has worsened over the last two years of economic downturn.
The survey of over 2,300 employees from the factory floor to the C-suite across 25 European countries also shows employees believe management is failing to provide effective leadership on compliance. Worse still, one quarter of our respondents do not trust management to behave ethically. Indeed 59% of those surveyed expect management to cut corners in order to achieve targets; half of management respondents themselves share this sentiment.
David Stulb, Ernst & Young’s Global Fraud Investigation & Disputes Services Leader says: “Our survey findings should cause concern among directors across Europe. Complacency about fraud, bribery and corruption, combined with cost cutting initiatives at many companies, creates additional exposure. With new legislation like the UK Bribery Act giving regulators tougher enforcement powers, management in particular should demonstrate greater commitment to ethical conduct through their actions, including making tough choices regarding departmental budgets and disciplinary measures.”
Employees not prepared for risks
Many companies have to do more to establish a robust and effective corporate compliance environment. Staff awareness of anti-corruption policies is very low. Nearly 80% have not received anti-bribery or anti-corruption training; and only one-third thinks their anti-bribery policy contains clear guidance.
Breaking down these results by country also reveals some alarming findings. Only 26% of employees in the UK and fewer than 20% in countries such as France and Germany having received anti-corruption training, despite the recent regulatory focus on anti-corruption efforts.
Failure of compliance leadership from management
It is clear that employees across Europe hold boards and senior management accountable for establishing and enforcing appropriate corporate behavior. Over three-quarters of those surveyed think that company boards should be held personally liable for fraud, bribery and corruption within their organization.
The frustration employees have with their management is also highlighted by a significant increase in the number of people calling for more regulatory oversight. Seventy-seven percent of those surveyed want regulators to do more to reduce the risk of company fraud, bribery and corruption, with the strongest response coming from countries that have been most affected by the recent financial crisis. Over 80% of respondents in Portugal, Ireland, Spain and Greece would like to see more supervision by regulators. This demand from employees for increased regulatory action is reflected in recent trends, with more enforcement actions under the US Foreign Corrupt Practices Act (FCPA) in 2010 than ever before and 7 of the largest 10 settlements in the history of the FCPA involving firms headquartered outside the US.
David Stulb adds; “You don’t have an effective business strategy unless everyone from the CEO to the ‘shop-floor’ understands compliance. These results highlight a lack of improvement in the corporate response to fraud and corruption that is surprising given the tougher enforcement of anti-bribery legislation in many countries. The increasing support by local prosecutors to US-led investigations makes the risks from fraud and corruption even more acute.”
Impact of ethical conduct on company performance
Avoiding regulatory enforcement however should not be the sole impetus to an improved focus on ethical conduct. The survey results show that employees perceive that business benefits can be achieved by companies acting with integrity. Seventy-five percent say that there is a commercial advantage to ethical behavior. Employees certainly prefer to work for companies with strong reputations for ethical conduct, with 45% of our respondents unwilling to work for a company involved in a major bribery or corruption case.
David Stulb concludes, “The survey provides a wake-up call for European companies. A declining focus on anti-fraud measures and a continued tolerance of unethical behavior inevitably increases the risk of fraud, bribery and corruption. Reinvigorating the commitment by management and their Boards to ethical growth should be an urgent priority, and will be appreciated by employees and stakeholders alike.”
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Notes to editors
About the survey
In January and February 2011 our researchers conducted a total of 2,365 interviews in 25 European countries either by telephone, online, or in person. Those interviewed worked for companies that were either stock exchange listed, multinational or employed more than 1,000 people. A copy of the survey is available at www.ey.com
About Ernst & Young’s Fraud Investigation & Dispute Services
Dealing with complex issues of fraud, regulatory compliance and business disputes can detract from efforts to achieve your company’s potential. Better management of fraud risk and compliance exposure is a critical business priority – no matter the industry sector. With our more than 1,200 fraud investigation and dispute professionals around the world, we assemble the right multidisciplinary and culturally aligned team to work with you and your legal advisors. And we work to give you the benefit of our broad sector experience, our deep subject matter knowledge and the latest insights from our work worldwide. It’s how Ernst & Young makes a difference.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
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