4 out of 10 global executives reluctant to disclose significant corruption incident to authorities

In a Deloitte survey of 329 executives from around the world, 41% of respondents indicated that senior management should investigate and deal with matters internally or wait to see if there are consequences rather than make a voluntary disclosure to authorities if a significant incident of corruption was uncovered at their organisations.

The study, titled 'Fortifying Anti-Corruption in Today’s Corporation', also revealed that despite differing views about regulatory disclosure, the vast majority of those surveyed (93%) believe that an internal investigation should be conducted if a significant incident of corruption were uncovered, and 75% support zero tolerance anti-corruption policies with strong disciplinary measures, including firing those responsible for corrupt acts.

Nic Carrington, forensic and dispute services partner at Deloitte commented: “Certainly as it relates to voluntary disclosure to the UK authorities, we are possibly not yet at a point where companies would readily see that such action would be in their best interest, given the historic attention, or rather lack of it, on corruption issues.  However, the new SFO leadership in very recent months has been vociferous in underlining its new commitment to combating overseas corruption and indeed encouraging companies to self-report to them rather than the other way round.

“It certainly seems that the UK may find itself moving inexorably to a more American style of regulation and prosecution of corruption, where the merits of voluntary disclosure have been well publicised. Keeping the lid on such matters in the future may well prove to not be in a company’s best interests.”

The study also revealed the increasing role of internal audit in anti-corruption compliance. When asked to select up to three sources that would likely lead to changes in the respondents’ organisations, advice from internal auditors was identified by 57% of respondents as most likely to lead to changes in an anti-corruption programme, while compliance and internal audits were selected by 80% of respondents as one of the best ways to measure a programme’s effectiveness. In addition, 47% of those surveyed said that integrating an anti-corruption programme into their internal audit system would make detection and prevention of corruption easier, with an additional 33% indicating that it is already integrated.

”Straightforward lapses and overrides of internal controls are frequently at the heart of corruption cases.  Companies need to ensure that their anti corruption compliance programmes are not just sitting on the office bookshelves of executive management, but that rather line staff are putting them into practice on a daily basis.  Focused testing of these programmes by experienced staff, including at a transactional level, is a must.”

Other findings from the study include:

• Geographic and industry risks are reportedly being addressed by many.  While two-thirds of respondents (67%) report that their companies adequately address corruption risks in the geographic regions where they do business and 72% say their companies’ risks are adequately addressed for their industries, 32% would prefer that their organisations spend more on anti-corruption programmes. Key point: Corporations have made strides in anti-corruption, but more can be done to address corruption risk.
• Fitting in and gaining business are top motivators for bribery by executives.  When asked about the top motivators for an executive to pay bribes in their industry, fitting in with local business cultures (33%) and gaining more business (40%) garnered the most responses. Key Point: It’s human nature to be tempted to adjust ones moral compass to the situation.
• Anti-corruption programmes aren’t consistently used around the world.  Some companies still lack anti-corruption programmes, despite the inherent risks. Geographically, 18.2% of Middle Eastern and African, 15.8% of Eastern European, 9.1% of Asia-Pacific, 8 % of emerging market and 7.7% of U.S. business leaders surveyed reported having no anti-corruption program in place. Key point: Multinational companies considering new cross-border partnerships or transactions should include anti-corruption programme reviews as part of overall due diligence.
• Tone at the top should set anti-corruption policy. While senior management (39%), general counsel (24%) and compliance officers (21%) were the first groups identified from which executives would seek advice in handling a corruption incident, 61% of respondents said that the most effective role for the CEO is to send out a strong signal and remain personally involved in anti-corruption efforts. Key point: Executives expect committed leadership on this issue from the CEO.

“In the downturn, as retaining and winning business becomes increasingly vital, increased pressure on managers to deliver can create even greater incentives and temptation to resort to bribery and corruption to “seal the deal”. These survey findings should hopefully serve as a wake-up call for corporates to reassess their potential exposures in this area.  Taking the line that what happens “overseas” will not have consequences “at home”, is not something that will wash either legally or with the authorities.”

Visit www.deloitte.co.uk/corruption for a short video on this topic.

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About the Survey

Deloitte contracted the Economist Intelligence Unit to conduct a survey of general management, finance, strategy and business development professionals around the world regarding global corruption. The survey was conducted from June 25 to August 4, 2008 through an online questionnaire. The 329 survey respondents were drawn from the Economist Intelligence Unit's global executive survey panel.

Among the executives participating in the survey, 46% were board members or members of the C-suite and 50% were management level.  Respondents were predominantly from the financial services (19%), IT/technology (11%) and manufacturing (9%) industries.

Global revenues for participants’ organisations were (in U.S. Dollars): more than $10 billion (35%); $5 billion to $10 billion (14%); $1 billion to $5 billion (28%); and $500 million to $1 billion (23%).

Respondents were individually located in Asia-Pacific (30%), North America (28%), Western Europe (25%), Middle East and Africa (7%), Eastern Europe (6%) and Latin America (4%).

About Deloitte

In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTT and its member firms.

The information contained in this press release is correct at the time of going to press.

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