- 38 percent of executives across 55 countries say corruption occurs widely in business
- Levels of bribery and corruption in emerging markets still twice that of developed markets
- 20 percent of respondents under the age of 35 would justify cash payments to win or retain business
LONDON (APRIL 25, 2018) – The scale of bribery and corruption has shown no improvement globally since 2012, despite the unprecedented level of enforcement activity and introduction of new corporate criminal liability laws in that time. This is according to the 15th EY Global Fraud Survey, which surveyed 2,550 executives across 55 countries.
This year’s survey found that despite regulators and law enforcement agencies around the world imposing more than US$11 billion of financial penalties since 2012, 38 percent of global executives still believe bribery and corrupt practices remain prevalent in business.
Andrew Gordon, EY Global Fraud Investigation & Dispute Services Leader, says:
“The lack of improvement in global levels of corruption over the last six years shows that unethical behavior in business remains a daunting challenge, despite intensified global enforcement.
“While corruption remains so prevalent, businesses remain vulnerable to significant financial and reputational harm. Management teams must identify and address the root causes of unethical conduct in their organization. Compliance programs need to keep pace with the impact of rapid technological advancements and the increasingly complex risk environment on business operations. More robust risk management should be considered a strategic means of improving business performance.”
Emerging markets still exhibit higher levels of corruption
The difference in levels of corruption between countries remains significant, with 20 percent of respondents in developed markets indicating that bribery and corruption occurs widely in business, compared with more than half (52 percent) of those in emerging markets.
Regions in which corruption risks were higher than the global average included Central and Eastern Europe (47 percent), the Middle East (62 percent) and Latin America (74 percent), despite improved anti-corruption legislation and more active enforcement in some countries.
Overall, the findings show that there is often a lag between the introduction of stronger anti-bribery laws and reduced corruption, with Brazil, the Netherlands and the UK showing this trend. Brazil, for example, has seen the introduction of legislation and increased enforcement over the last four years. Yet, 96 percent of Brazilian respondents indicate that corrupt practices occur widely in business – an increase from 80 percent in 2014 when the new laws were introduced. In the US, however, where enforcement of the Foreign Corrupt Practices Act (FCPA) intensified in the mid-2000s, perceived levels of corruption fell this year to 18 percent, an improvement from 22 percent in 2014.
Mismatch remains between intention and performance
Integrity sits high on the board agenda, the survey finds, with 97 percent recognizing the importance of their organization being seen to operate with integrity. Although improved customer perception, staff retention and business performance were all seen as benefits of demonstrating integrity, there remains a mismatch between intentions and actual behavior. Thirteen percent of respondents say they would justify making cash payments to win or retain business. Interestingly, this rises to 20 percent among those that are under the age of 35 years old.
The report suggests that organizations need to make it clear that acting with integrity is everyone’s responsibility, and while that includes the importance of management setting the right tone from the top, it also involves individual employees. The findings show that 22 percent of respondents feel that individuals should take primary responsibility for their organization behaving with integrity, while 41 percent say it is management’s primary responsibility. And the report indicates that there may be some level of disillusionment among companies with regards to their ability to “walk the walk” when it comes to managing misconduct. Seventy-eight percent of respondents believe their organizations have the clear intent of penalizing misconduct, but only 57 percent are aware of people having actually been penalized.
Ensuring that ethical conduct is managed effectively is not only an issue that needs to be dealt with internally, but also with third parties and those acting on behalf of the organization, according to the report. Yet third-party due diligence also seems to be a low priority, with only 59 percent of respondents indicating they have a tailored risk-based approach to due diligence on third parties.
Brian Loughman, EY Americas Leader, Fraud Investigation & Dispute Services, says:
“One hundred percent of US respondents think it is important for companies to demonstrate they operate with integrity. But there is a disconnect about who is responsible for ensuring the company is acting ethically. Among US respondents, some think it is management’s responsibility, while others believe it rests with individual employees, compliance executives, or the board. In truth it is a team effort. Business leaders should focus on establishing a culture of integrity throughout their organizations.”
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About the survey
Between October 2017 and January 2018, our researchers — the global market research agency Ipsos MORI —conducted 2,550 interviews in the local language with senior decision-makers in a sample of the largest companies in 55 countries and territories. The polling sample was designed to elicit the views of executives with responsibility for tackling fraud, mainly CFOs, CCOs, general counsel and heads of internal audit.
Perceptions of respondents of bribery/corrupt practices happening widely in business in their country/region
The table below shows the percentage of survey respondents who perceive that bribery/corrupt practices occur widely in business in their own country/region. Results are based on a sample size of 50 for each country/region except where stated.
Question to respondents: Bribery/corrupt practices happen widely in business in your country/region?
Figures below relate to ‘yes’ responses