Sign up for regular news, views and insights about corporate governance

Name
Email
Company
Job title
Industry

Close

Setting the benchmark in corporate integrity

Report suggests fraud and bribery on the up

Large organisations have been found to be misrepresenting their financial performance and engaging in bribery as a means to meet growth and profit expectations
French investigators placed Swiss bank UBS under formal investigation on suspicion that it tried to persuade rich French clients to open undeclared accounts in Switzerland, a legal source has said

Large organisations have been found to be misrepresenting their financial performance and engaging in bribery as a means to meet growth and profit expectations

Ernst and Young’s twelfth annual Global Fraud Survey has revealed that one in five of almost 3,500 staff in 36 nations confirmed manipulation in their firms. Unethical conduct including fraud, bribery and corruption are becoming more prevalent as large firms struggle to meet projections.

Despite the results illustrating that countries such as the UK and India are strengthening their enforcement regimes, the level of fraud worldwide still remains high. On a global basis, 39 percent of respondents reported bribery or corrupt practices occurred frequently in their countries. Despite introduction the Bribery Act in the UK to dissuade employees from entering into bad gift deals as a way to secure financial transactions, 37 percent of UK survey respondents believed that bribery and corruption were common in business.

This speaks volumes of the 75 percent of respondents who agreed that managers were under increased pressure to deliver good financial performance over the next 12 months.

The alarming statistics highlight the fact that many firms are not familiar with anti-bribery and anti-corruption policies. Nearly half of sales staff across the board do not consider existing policies relevant to their role. Acknowledging ABAC regulation could significantly reduce these fraudulent practices, but currently, without adequately trained employees, the ability of companies to identify issues or act on allegations remains difficult.

Respondents said that work pressure linked to performance is leading to more cuts in remuneration in developing markets than in developed ones. At least 43 percent of Indian respondents said that this was the case in their country, where the government is currently working on its ABAC legislations. 33 percent of Indian respondents felt that offering cash payments to win or retain business can be justified, a reflection of the country’s cultural practices. “India has robust policies but the issue is compliance,” said Arpinder Singh, India leader of Ernst & Young’s fraud investigation and dispute services practice. “In the current challenging market condition, the incentives for unethical conduct can be strong when personal remuneration is at stake and pressure to deliver growth is being felt directly.”

“In this environment, some inevitably succumb to unethical behaviour,” said David Stulb, global leader of Ernst & Young’s fraud investigation and dispute services practice. “Shareholders expect management to take responsibility for protecting the business by implementing anti-bribery and anti-fraud programmes at all levels of their organisation. Boards must challenge management to ensure they are focused on high risk areas.”

The role of the CFO has been brought into question by the audit and consultancy firm.

Regulators and other external stakeholders rely on the CFO as a key interface with the business, meaning that they have a resounding responsibility placed on them to override the any corrupt actions. Worryingly, 15 percent of CFOs surveyed would be willing to make cash payments to win or retain business and 4 percent view misstating a company’s financial performance as justifiable to help a business survive. Less than half of these had attended ABAC training themselves. If businesses are to become more honest, the CFO needs to lead by example.

 

News

Aviva’s failure to meet objectives reflected in slashed dividends

Despite job cuts and a vast disposal programme, the insurance firm’s executives have seen a pay freeze, dividends slashed and shares crashing resulting from a £3.1bn loss after tax

Deutsche ordered to improve internal controls

Imminent order by German regulator is likely to lead to Deutsche Bank reaching a settlement over Libor scandal

RBS shareholders file suit against bank and former directors

RBS shareholders have launched a class-action suit over the 2008 rights offering a few months before the bank was bailed out by British government

Nigeria to implement corporate governance code by 2014

New code will centralise corporate governance practices and ascribe penalties for lack of compliance

Pay ratio disclosure leaves directors unconvinced

The SEC’s recent pay ratio proposal has given rise to criticism and suggestions that it is an ineffective way of curbing excessive executive pay

Legal world “requires categorisation”

As the legal industry continues to boom, it’s becoming ever more challenging for firms to choose where to seek council. Corporate Governance Report spoke to World Finance Editor Alexander Redcliffe about the magazine’s legal awards

Poor governance: a tax on Russia’s innovative companies

Recent reports reveal the extent to which investment is hindered by poor governance in Russia, and outlines the ways in which it can be combated

OXY’s chairman ousted by shareholders


The oil and gas company is to have undergone a recent change of personnel, the chairman herein being forcibly made to step aside by activist shareholders

Just how flexible is the UK employment market?

Government declares that “firms have a duty to hire Britons” but what are the implications for employers?

Xerox chief accounting officer appointed to the IASB

Trustees of the IFRS Foundation have announced the appointment of Gary Kaburek as the sixteenth member of the International Accounting Standards Board

Carl Icahn gives Apple a boost

Apple’s market value rose by an estimated $17bn after billionaire investor Carl Icahn tweeted his support for the company. Shares have since hit a seven-month high

Australian government launches mining probe

Australia’s securities regulator is set to launch a probe of the country’s biggest mining companies in a bid to crack down on selective briefings

New union group pledges to ‘tackle corporate responsibility’

The Trade Union Share Owners group will put union values at the heart of corporate governance through the Trade Union Voting and Engagement Guidelines

Fed Res enhances internal auditing standards

The US Federal Reserve is strongly encouraging banks to consider their internal auditing strategies to avoid regulatory intervention