Corporate integrity landscape faces an execution gap, says EY
Despite increased efforts, a new survey from EY has revealed standards of corporate integrity have failed to improve since the beginning of the pandemic according to most respondents.
The latest ‘Global Integrity Report’ from the professional services firm has tracked the impact of an enduring Covid-19 crisis on the growing discrepancy between the values espoused by organisations and what their senior leaders and employees are willing to do to gain an individual advantage in a pressured environment – described as the “say-do” gap.
According to EY, which together with global market research agency Ipsos surveyed almost 5,000 board members and employees across 50+ countries, the majority (55 percent) of respondents claim that integrity standards had slipped or plateaued at the their companies over the prior 18 months, despite growing awareness around the importance of corporate governance.
Indeed, 97 percent of the all respondents agreed that integrity is an important factor in contemporary business, with regulatory training, codes of conduct and statements on corporate values rising by an average of around 5 percentage points each among organisations since EY’s previous survey at the onset of the pandemic.
Yet, more than half of the surveyed board members say that Covid-19 has made it more difficult to comply with standards. “Sudden and tectonic change creates opportunities for unethical behaviour, including fraud and corruption,” said Andrew Gordon, Global Leader of Forensic & Integrity Services at EY, in the report.
This is mainly because companies facing intense commercial pressure overlook normal vetting processes that govern third-party relationships, while on the other, senior management, focused intently on business survival, may rationalise unethical behaviour. “These are operational challenges facing legal and compliance teams around the globe,” Gordon added.
For the unjaded, the overall results are staggering. Nearly one in five board members stated that they would be prepared to mislead external parties such as auditors or regulators to improve their own career progression or remuneration, while over 40 percent acknowledged that unethical behaviour in senior leaders or high performers is largely tolerated; an 8 percentage point rise since the 2020 survey.
The lens on Australia
The results were even more pronounced in Australia, where 21 percent of respondents openly stated a willingness to engage in unethical behaviour to get ahead (compared to 18 percent globally).
Meanwhile, almost two thirds of all local respondents said that they felt pressure not to report misconduct, up a massive 21 percentage points compared to 2020, with 45 percent refusing to do so outright for fear of damaging their future career prospects, against the 30 percent global figure.
This fear isn’t unfounded. A recent research study conducted by Griffith University of more than 1,300 cases found that 77 percent of whistle-blowers experienced personal and interpersonal issues following a disclosure, such as stress and workplace ostracism, while almost 45 percent reported direct professional consequences, including harassment or intimidation, disciplinary action, the denial of promotions and even demotions and dismissals.
Part of the larger problem may be that just one third of the respondents believed that behaving with ethical standards is an important characteristic of ‘integrity’, with most deferring to laws, regulations and codes of conduct as the guiding principle. But EY warns that ultimately, “integrity in business is not about compliance box-ticking and risk management: it’s about protecting the organisation, its assets, and reputation – all of which drive long-term value.”
“Integrity is a difficult concept to define, as companies face different ethical dilemmas. But a progressive integrity agenda goes beyond restrictive compliance, opportunistic compliance, and avoidance of litigation,” says Katharina Weghmann, a partner in EY’s Forensic & Integrity Services practice.
“It’s about making the intangible tangible, about committing to the interdependence of business and society by embedding integrity into the culture and behaviours of the organisation.”
