‘Perception is reality when it comes to ethical conduct’: EY

A significant percentage of employees across Australia’s business community believe that achieving economic targets trumps the need for ethical behaviour and would also be reluctant to report misconduct via whistleblower hotlines.

EY on Tuesday launched its 2017 Asia-Pacific Fraud Survey, which explores the state of ethical behaviour across Australia’s business community, and raised a number of concerns.

Triggered by geopolitical risk, economic uncertainty and increased regulatory scrutiny, the report found that economic targets trump ethical conduct, which in turn is having a detrimental effect on employee satisfaction.

The recent ATO fraud scandal highlights the presence of fraud and corruption across the Australian business landscape with 39 per cent of Australian respondents of the view that bribery and corrupt practices are widespread in Australia.

Almost two-thirds of (65 per cent) of Australian respondents believe a strong reputation for ethical behaviour is a commercial advantage, yet 43 per cent believe people with questionable ethical practices are seen to be promoted.
 

Inconsistent compliance policies

More than nine out of ten (93 per cent) respondents to the EY Fraud Survey want to work for a compliant organisation but are confused by inconsistent compliance policies that lack clarity and are clouded in legal jargon. In fact, 35 per cent of Australian respondents believe their organisation’s current code of conduct has little impact on how employees actually behave.  

“What’s most concerning for Australian business is the overwhelming belief that achieving economic targets trumps the need for ethical behaviour,” said EY Oceania managing partner, Fraud Investigation & Dispute Services, Rob Locke.

“Our survey revealed that despite wanting to work for ethical organisations, 17 per cent believe it is justified to deliberately misstate a company’s financial performance to meet financial targets. A further 20 per cent of respondents believe it is justified to amend financial reports to provide a more positive outlook on results.

“CEOs, boards and senior management not only play an integral role in setting compliance policies but have a responsibility to ensure the wider company is following them. With 43 per cent of Australian respondents believing people with questionable ethical practices are seen to be promoted, Australian business leaders need to recognise that perception is reality when it comes to ethical conduct.”

EY’s APAC Fraud Survey 2017 - titled ‘Economic uncertainty/Unethical conduct: How should over-burdened compliance functions respond?’ - surveyed 1,698 employees from large businesses in 14 Asia-Pacific territories.

It found that only 54 per cent of APAC respondents believe their anti-bribery/anti-corruption (ABAC) policies are relevant and effective. In Australia, 26 per cent of respondents would shorten their existing ABAC policies to ensure key messages don’t get lost and 23 per cent would simplify the language so it wasn’t overly complicated or composed of legal jargon.  

“Employees are demanding absolute clarity and anything short of that impacts morale, hiring, retention and overall business performance. Corporates need to simplify their compliance protocols to ensure employees follow them,” said Chris Fordham, EY Asia-Pacific leader, Fraud Investigation & Dispute Services.

Over a quarter of Australian respondents (27 per cent) believe it is common practice in their industry or sector to use bribery to win contracts and 31 per cent believe Australian companies often report financial performance as better than it is.  Alarmingly, 23 per cent of Australian respondents believe there are no clear penalties for breaking ABAC policies.
 

Whistleblowing policies

Sixty-one percent of APAC respondents say they have a whistleblowing hotline within their organisation. But when it comes to reporting unethical acts, employees are reluctant to use the existing internal whistleblower hotlines as they do not trust their organisation will protect their anonymity or follow-up with proper remedial actions.

Nearly a third (28 per cent) say they would prefer to use external law-enforcement hotlines and even social media channels to report misconduct instead.

In Australia increased regulatory scrutiny and activity continues to have an impact on employee willingness to use whistleblowing hotlines, with 27 per cent of Australian respondents stating they would be most comfortable reporting misconduct directly to their senior manager.

Despite the growing presence of whistleblowing policies, almost one in five (17 per cent) Australian respondents have withheld information or concerns due to internal pressures.

“It’s encouraging that more companies in Asia-Pacific now have whistleblower hotlines. But we’re concerned that employees still don’t have enough faith that their reports will be handled confidentially or that these reporting mechanisms will result in proper follow-up and punishment for the guilty parties,” said Fordham.

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