According to the recently released EY 2022 Global Integrity Report, companies face a concerning ethics gap within companies as leaders struggle to create and communicate a strong and effective culture of integrity.
The Report canvassed more than more than 4,700 employees, managers and board directors from 54 countries and territories, and found that more than half (55 percent of respondents) believe that standards of integrity have either stayed the same or worsened over the last 18 months. Forty-one percent of respondents (as well as 54 percent of surveyed board members) blame the COVID-19 pandemic for making it more difficult to carry out business with integrity.
“The COVID-19 pandemic has had a serious impact on integrity standards for companies around the world,” says Andrew Gordon, EY Global Forensic & Integrity Services Leader. “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.”
Perhaps the most disturbing figure from the study was that nearly one in five (18 percent) of board members surveyed said they were prepared to mislead external parties, such as auditor or regulators, to improve their own career progression or pay. Only three percent of employees surveyed said the same thing, which points to a noticeable gap between what leaders say and do when it comes to ethics.
While nearly all survey respondents (97 percent) said that integrity was important, and that companies were increasing their investment in training and processes, only a third (33 percent) of respondents believe that behaving ethically is an important characteristic of integrity. Exactly half (50 percent) of them said that compliance with laws, regulations, and codes of conduct were an important part of integrity.
When it came to unethical behavior, 42 percent of surveyed board members said that unethical behavior in senior or high performers was tolerated in their organization. That figure is up by more than a third (34 percent) from 2020.
“There is a worrying divide between investment in action and genuine change,” Gordon says. “A progressive integrity agenda goes beyond frameworks and policy – businesses must look beyond box ticking and focus on creating an integrity culture at all levels within their organizations. Leaders should be under no illusion that integrity is an easy fix; however, the first step is setting the right tone from the top.”
To that end, the report outlines five actions companies can take to accelerate their integrity agendas.
1) Really know your business. Fraud and corruption risk assessments must be taken seriously from the top down, be data-enabled, and performed regularly to expose and address any weaknesses.
2) Put the human into compliance. Systems don’t commit fraud. People do. Building a culture of doing the right thing is as important as a strong control environment.
3) Be empowered by your own data. Use your own data to detect irregular behavior and guide the response to preventing and addressing it.
4) Educate, don’t train. Communicate the why as well as the what of business integrity to build true awareness.
5) Speak up and support whistleblowing. Give people the means to report wrongdoing, and the certainty that they will be protected from retaliation.
“The business landscape has evolved beyond recognition in the last two years and there are many new challenges that leaders must address,” Gordon says. “Even the best compliance frameworks can be breached if there isn’t a culture of doing the right thing. That’s why building a strong culture of integrity is just as important as putting policies in place.”
To read the full text of the EY 2022 Global Integrity Report, click here.
On February 10, Ethisphere and EY will hold the 2022 EY Global Integrity Report—How a Focus on Enhanced Governance Can Boost Corporate Integrity. The webcast will feature leaders from EY and the BELA South Asia community as they discuss India-specific trends and findings from the Report. Click here to register.
