Asian companies’ attitudes towards fraud, bribery and corruption display schizophrenic tendencies. Although the vast majority support tighter controls and more regulatory supervision, many are quite happy to engage in activities that might send their senior officers to jail.
According to Ernst & Young’s latest annual Global Fraud Survey, 82% of respondents in Asia are in favour of greater supervision, yet compared with their peers elsewhere in the world, those senior executives — including 400 CFOs — are more prepared to spend money on bribes or even misstate their companies’ financial performance.
The survey, which was released this morning, was conducted between November 2011 and February 2012. More than 1,700 interviews were carried out in 43 countries with individuals from a sample of the biggest companies by turnover in each country.
In some cases the regional gulf is substantial. As many as 45% in Asia, compared with 30% globally, are content to splash out on entertainment in order to win or retain business; 39% compared with 15% would actually dole out hard cash; and 31% compared with 16% would donate personal gifts.
Of course, there is a fine line between entertainment as normal business practice and a corrupt inducement; a moderate lunch rather than a weekend break in a resort hotel, for example — and between a memento and a lavish present, an embossed diary rather than a fancy watch, for instance.
But straightforward cash bungs lack any ambiguity. Neither does misstating financial performance, which Asian executives are three times more likely (15%) to do than the global average (5%).
Indonesia and Vietnam score badly on these counts. As many as 60% of Indonesian respondents are more willing to make cash payments, and 28% to misstate their financial performance. In Vietnam, the proportions are 28% and 36% respectively. Meanwhile, 54% of Indian respondents are prepared to pay out more on entertainment.
Yet, perhaps strangely, the Asian executives indicated they would prefer more supervision to combat the risk of the practices in which so many indulge. Indeed, they are keener than others, as reflected in the global average of just 69%. Maybe game theory could resolve this apparent dichotomy.
“In Asia, we’ve seen governments increasing their efforts in fighting corruption. Hong Kong and Singapore have certainly been leading the way, while China, Malaysia and Indonesia had also made notable efforts to catch up,” insisted Chris Fordham, managing partner Asia-Pacific leader of fraud investigation & dispute services at Ernst & Young.
However, worldwide, the pressure to meet revenue growth targets is undermining some executives’ commitment to compliance with policies and laws, he said. And, the competitive landscape continues to be distorted by unethical conduct.
The risks and dangers are likely to increase, as international firms expand into new regions. Due diligence on third parties is expected by regulators. It is required by both the US Foreign and Corrupt Practices Act and the UK Bribery Act.
One consequence is that CFOs, in particular, will be under the spotlight.
“The CFO’s increasing influence within companies means they have a key role in preventing fraud, bribery or corruption and they need to redouble their efforts to set the right tone,” said Fordham.
