Bribery and corruption are widespread
Q: For each of the following, can you tell me whether you think it applies, or does not apply, to your country/industry, or whether you don’t know?
Base: All respondents (1,758)
The “Don’t know” and “Refused” percentages have been omitted to allow better comparison between the responses given. China results include Hong Kong.
Selected country results are contrasted with global results to the left for illustrative purposes.
39% of respondents reported that bribery or corrupt practices occur frequently in their countries.
Businesses continue to face a challenging economic environment.
Driven by market uncertainties and declining economic growth forecasts, many companies are struggling to maintain margins. With fewer remaining opportunities for cost-cutting, many businesses are now focused on opportunities in rapid-growth markets.
Even these markets, however, are feeling the effects of a weakened global economy.
In this environment, our 12th Global Fraud Survey's findings are, unfortunately, a further cause for concern.
They suggest that bribery, corruption and fraud remain widespread. At the same time, many countries are strengthening their enforcement regimes, for example the UK, with the introduction of the Bribery Act, and India, with a range of proposed anti-bribery/anti-corruption (ABAC) legislation.
As regulatory activity intensifies, the risk of external scrutiny of corporate activity also increases. Senior management must do more to ensure that they and their companies are not found wanting should their activities come under the spotlight.
Growing markets, growing risks
Bribery and corruption remain pervasive. On a global basis, 39% of respondents reported that bribery or corrupt practices occur frequently in their countries. The challenge is even greater in rapid-growth markets, where a majority of respondents believe these practices are common.
For example in Brazil, 84% responded that corruption was widespread. Multinational businesses inevitably have to confront this challenge.
Regulators have recognized this. In 2011, enforcement actions under the US Foreign Corrupt Practices Act (FCPA) continued to focus on conduct in rapid-growth markets.
Thirty-one of the thirty-six reported FCPA cases related to activities in Asia, Eastern Europe and Latin America. Many of these prosecutions related to payments to employees or officials at state-run enterprises.
Bribery and corruption are widespread
Hard times strain ethical standards
There is little question that the current economic situation has exerted negative pressure on employees. One of the most troubling findings of the survey is the widespread acceptance of unethical business practices.
It is particularly alarming that respondents are increasingly willing to make cash payments (15% versus 9% in our last survey) and misstate financial performance (5% versus 3% in our last survey) to survive an economic downturn.
The findings from Far East Asia, where 15% of respondents think that financial performance misstatement can be justified are particularly shocking:
- In Indonesia, 60% of respondents consider making cash payments to win new business acceptable.
- In Vietnam, 36% of respondents consider it acceptable to misstate a company's financial performance.
It is no coincidence that this is a region where conduct has been heavily scrutinized by US authorities.
A weak control environment
Despite the risk, companies are still failing to do enough to prevent bribery and corruption. From the responses of our interviewees, it would appear that mixed messages are being given by management, with the overall tone often diluted by a lack of widespread training and a failure to penalize breaches.
While 81% of respondents say ABAC policies and codes of conduct are in place and a similar proportion agree that senior management strongly communicates its commitment to these, nearly half tell us that they do not believe people have been penalized for breaching ABAC policies.
After years of cost cutting, relatively labor-intensive measures and activities were less frequently cited as examples of ABAC controls in the respondents' businesses.
As many as 42% of respondents had not received training on ABAC policies.
Without adequately trained employees, the ability of companies to identify issues or robustly investigate and act on allegations is also likely to be diminished.
In this report, we further explore our survey results across the following topics:
This extensive research is part of Growing Beyond, our flagship program that explores how companies can grow faster by expanding into new markets, finding new ways to innovate and implementing new approaches to talent management.