The EY Global Integrity Report 2022, Tunnel vision or the bigger picture? reveals that while 100% of New Zealand (NZ) respondents to the latest EY Global Integrity Survey believe integrity is very important, the pandemic has made it more difficult for organisations to act with integrity in business dealings.
We know that organisations that demonstrate good governance, transparency and that have robust integrity frameworks are trusted by society and have compliance programs that create long-term value to employees, shareholders and broader community stakeholders. The rewards are many, including retaining top talent and attracting new customers.
More than half (62%) of employees and leaders from NZ companies believe that standards of corporate integrity have stayed the same or worsened over the last 18 months, and that unethical behaviour was often tolerated when the people involved were senior managers, despite NZ ranking third in the world for rating acting with integrity in business as important.
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.
Growth in compliance programs, yet failure to address unethical behaviour
In the last 12 months, there has been greater investment in integrity and compliance initiatives. However, the survey highlights that this increased investment is not being communicated effectively. NZ respondents said management talked about integrity in the workplace, but only a little over 42% reported regular training about relevant legal, regulatory, and professional development. Just one-in-five had sanctions in place to punish behaviour that failed to demonstrate integrity.
Along with a lack of awareness, there appears to be limited understanding of the critical importance of integrity, beyond compliance with rules and regulations. About a third of businesses had processes or training for conducting due diligence on customers and partners. Only a third of respondents say that an important characteristic of integrity is behaving with ethical standards. A progressive integrity agenda goes beyond just (1) restrictive compliance (what the law prevents); (2) opportunistic compliance (what the law allows); and (3) avoidance of litigation.
Ethical behaviour – an internal disconnect
The survey highlights a further disconnect when it comes to behaviour. Some respondents would behave unethically in order to protect their careers and about half (48%) of the NZ respondents said they would be concerned if information about management decisions were scrutinised.
The survey revealed that certain board members would in fact behave unethically including a willingness to mislead regulators or auditors (14%), falsifying financial records (12%), ignoring unethical behaviour by suppliers or third parties (8%), providing false information to management, falsifying customer records, or ignoring unethical behaviour by a team member (8%), and offering or accepting a bribe (6%).
Building compliance programs that are fit for purpose
The report also highlights NZ's 'don't speak up' culture, noting that 42% of workers had not reported concerns about misconduct, despite it affecting them. In addition, 59% of workers who reported misconduct felt pressure not to report it. Of those, more than half said they did not report misconduct because they did not think it would be acted on or were afraid it would hurt their career prospects.
Five actions to accelerate your integrity agenda
The report also identified five key actions that organisations should take toward corporate integrity:
- Get to really know your business by performing fraud and corruption risk assessments. Organisations need to have regular refreshers of their risk assessments in order to identify those changes in the risk landscape, and to adapt and change their monitoring plan to focus on the new or emerging areas of risk.
- Put the human into compliance and recognise that humans commit fraud, not systems or processes. This is why having a culture of ‘doing the right thing’ is a key element of the EY Integrity Agenda.
- Become empowered by the power of your organisation’s data to aid the combat of fraud. Organisations should use data to actively manage, monitor and evaluate their ethical environment and culture, and consider how to utilise data in compliance programs and risk assessments.
- Create awareness of integrity by focusing on education rather than training.
- Support whistleblowing by providing a safe and open environment for reporting suspected wrongdoing. Whistleblowing programs form a key pillar of an organisation’s corporate governance framework and it is critical for companies to build ethical and human processes to handle complaints. By incorporating this as part of their integrity agenda, organisations can ensure that their people don’t turn a blind eye to wrongdoing, are encouraged to speak up and are then rewarded, not penalised, for doing so.
About the author: Stephen Bell is the Forensic & integrity Services Partner, EY New Zealand and a Fellow of CPA Australia
Stephen’s professional services career has spanned three continents – North America, Europe and Oceania – with the last 17 years focussed on forensic and integrity services including:
- Financial reporting investigations;
- Fraud, corporate misconduct, conflict of interest and privacy investigations;
- Anti-money Laundering and Anti-Bribery compliance; and
- Litigation support and alternative dispute resolution services
- eDiscovery and Forensic Technology