24 May 2013

Hard times make for more fraud.  That seems to be the conclusion of the Ernst & Young 2013 Fraud Report. Respondents from 36 countries suggest that tighter pay and fewer perks result in opportunism and deteriorating business ethics. Pressure to perform is leading to dubious practices. Employees will do anything “from fudging the numbers to bribing officials and clients…”

These pressures, possibly to be expected in the “spluttering” markets of the developed world, seem to be having a similar effect in the rapidly growing Asian marketplace. The survey results suggest that a demand for growth while reducing pay and rewards seems to produce fraud, bribery and corruption.

Not surprisingly, the report is short on specifics; what tips the balance and how can businesses work out when standards are slipping?  A conclusion however is that senior managers’ have a quite different perception of what is going on in their organisation and how corruption is dealt with, than their employees.

“…Senior staff are considerably more likely to think the company has clear policies, training and sanctions for corruption than their subordinates do—which might mean they’re a little too trusting that such safeguards will catch things before they get out of hand…”

Responses in the State Services integrity survey in 2010 indicated some similarity with the pattern in this Figure – that managers had a more rosy view of the effectiveness of agency integrity policies and the effectiveness of implementation than other employee groups. Contrastingly employees felt their immediate managers were more effective in communicating the importance of integrity than senior managers and much more effective than middle management. And yet they were more likely to respond that middle managers set a better example of integrity and their senior managers.