UK companies still have work to do on ethics


By Samantha White

High-profile scandals such as LIBOR and foreign exchange rigging have prompted authorities to introduce a raft of new regulations designed to raise ethical standards. Likewise, companies have implemented policies to promote this goal, but there is still work to be done in terms of meaningful implementation and enforcement, according to research by EY.

In the UK, 46% of participants in the EY 2015 Europe, Middle East, India and Africa (EMEIA) Fraud Survey said that the level of regulation in their sector has increased in the past two years. Yet only 15% felt this had had a positive impact on improving ethical standards in their company.

Overall, 28% of UK respondents described their company’s ethical standards as “very good”, while the average for the EMEIA region was 26%.

More broadly, the number of UK respondents who consider bribery and corrupt practice to be widespread fell from 37% in 2013 to 27%. This is significantly lower than the regional average, with 51% of those surveyed deeming corruption to be widespread in their own country.

The UK Bribery Act appears to have improved awareness of acceptable standards of conduct amongst individuals. The number of respondents who consider it acceptable to offer gifts and services to help their business survive has fallen from 19% in the last edition of the survey, in 2013, to 5% this time.

In terms of policy enforcement, 60% of UK respondents said their company had an anti-bribery or anti-corruption policy, but only 25% had seen action taken against employees who had breached guidelines.

Following up on issues raised by whistle-blowers is another area in need of improvement. Though 79% of the UK companies represented in the poll have a whistle-blowing hotline in place, only 28% of those surveyed said that their company always followed up on reports made.

“The whistle-blowing statistics are particularly alarming as employees are at their most vulnerable when they choose to uncover misdemeanours within their ranks,” John Smart, head of EY’s Fraud Investigations and Disputes team in the UK and Ireland, said in a news release. “Failing to follow up on whistle-blowing allegations can seriously erode trust in an organisation’s ability to tackle fraud and corruption.”
 
In addition to adequate enforcement, policies should be supplemented with consistent messaging from the leadership, whistle-blowers should be rewarded, and role models should be highlighted, Smart said. 

Tackling these issues can bring benefits beyond simply raising the ethical standard, according to the report, which argues that ethical conduct is at the core of sustainable growth. The survey found that organisations that have achieved revenue growth over the last two years are more likely to be seen as ethical by their employees.

Samantha White (swhite@aicpa.org) is a CGMA Magazine senior editor.

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