More than half (55%) of employees and leaders from companies around the world believe that standards of corporate integrity have stayed the same or worsened over the last 18 months, according to the 2022 EY Global Integrity Report.
While a record (97%) respondents to the survey agree that integrity is important within their organizations, 41% say that the COVID-19 pandemic is making it more difficult to act with integrity in business dealings.
The survey, which canvassed the views of more than 4,700 employees, managers and board directors from 54 countries and territories, found that leaders are struggling to create and communicate a strong and effective culture of integrity within their business.
Andrew Gordon, EY Global Forensic & Integrity Services Leader, says: “The COVID-19 pandemic has had a serious impact on integrity standards for companies around the world. The change to ways of working throughout the COVID-19 pandemic has created a heightened risk of fraud and unethical behavior. Hybrid working makes it difficult to undertake effective compliance monitoring, and fraud risk factors typically increase at a time of crisis because companies and individuals face more financial pressures.”
Growth in compliance programs, yet failure to address unethical behavior
In the last 12 months, there has been greater investment in integrity and compliance initiatives: 53% of responding organizations have a code of conduct in place, compared with 47% 18 months ago. There is also an uptick in training programs, with 46% of businesses providing regular training on relevant legal regulatory or professional requirements, compared with 38% in 2020.
However, the survey highlights that this increased investment is not being communicated effectively and senior management is often over-confident in the effectiveness of its corporate integrity programs. For example, while 60% of board member respondents say that their organization has communicated the importance of behaving with integrity frequently in the last 18 months, less than a third (30%) of employee respondents remember seeing any communications on the topic.
There is also a gap between the views of board members and employees in relation to awareness of policies on working from home (80% vs. 51%) and awareness of training on data privacy regulations (52% vs. 35%).
Along with a lack of awareness, there appears to be limited understanding of the critical importance of integrity, beyond compliance with rules and regulations. Only a third (33%) of respondents say that an important characteristic of integrity is behaving with ethical standards.
Ethical behavior – an internal disconnect
The survey highlights a further disconnect when it comes to behavior. There appears to be a willingness among the most senior executives to act outside the compliance rules. Board members who were questioned as part of the research were five times as likely as employees to falsify financial records (15% vs. 3%) and six times as likely to say they would be willing to mislead external third parties such as auditors (18% vs. 3%).
Building compliance programs that are fit for purpose
The survey also looks at respondents’ views around data protection and privacy. Regulation in these areas has been the focus of new legislation over recent years and 61% of respondents agree that this is beneficial for business.
Findings for Romania
In Romania, 67% of the people that took part in the survey believe that it is very important to be able to demonstrate that their organization operates with integrity, slightly above the average in Eastern Europe (65%). 75% of respondents also indicated that the general public in Romania has higher expectations than they used to of how people should behave at work.
Clarisa Tesu, EY Romania Forensic & Integrity Services leader said: „It is very encouraging to see that most respondents (52%) stated that the standards of integrity have got better in Romania in the last 18 months, with 45% claiming they have stayed the same, while only 3% believe they have gotten worse. For this statistic, Romania is among the countries with the most positive responses.”
In a rather worrying manner, 23% of respondents stated that they would be ready to engage in various forms of misconduct (including falsifying financial records, engaging in unethical conduct, offering/accepting a bribe, or misleading external parties such as auditors or regulators), if that meant they can improve their own career or remuneration development.
Clarisa Tesu, EY Romania Forensic & Integrity Services leader: “The business economic environment has changed radically in the last two years, during which we have all faced many challenges both operational and organizational culture. Our clients have unfortunately been faced with a wide variety of compliance and integrity issues, from cases of non-compliance with internal procedures to more complex cases of embezzlement and misappropriation of assets. Even the best compliance systems can be violated if there is no culture of integrity. It is the people, not the systems, who ultimately commit fraud. That’s why building a culture of solid integrity is as important as implementing compliance procedures and controls.”
One area of clear improvement would be the Whistleblowing area, since only 62% of respondents believe that that they can safely report wrong-doing without being subject to retaliation. In comparison, in more developed countries, 69% of respondents feel safe.
However, 63% of respondents from Romania state to have NEVER reported issues of misconduct, be it to management or through a WB hotline (behind the Eastern European average of 67% of respondents). Also, 36% of respondents have had concerns about misconduct but have not reported it and 58% of those who have reported misconduct felt under pressure not to report. Moreover, even if properly reported, only a minority of respondents (49%) agrees that their companies have taken action against employees breaching integrity standards.
Clarisa Tesu, EY Romania Forensic & Integrity Services leader: “These results underline the need to improve the internal structure of reporting deviations and to promote a culture of integrity and transparency within the organization. With the transposition of the European Directive 2019/1937 on the protection of whistleblowers, organizations with more than 250 employees will have to implement a confidential reporting channel, address the reported deviations within 3 months and protect whistleblowers against any retaliation.”
What is more, 56% of Romanian respondents believe that the Covid-19 pandemic has made it more difficult for organizations to conduct their business with integrity.