Ernst & Young Survey: Corruption Courses Through Companies Globally

Tuesday, 21 May 2013 08:05 AM

By Dan Weil

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Corruption runs rampant at the corporate level of companies globally, according to a new survey.

The survey, which was conducted late last year by Ipsos on behalf of Ernst & Young, included responses from 3,459 employees of large companies in 36 countries in Europe, Africa, the Mideast and India about their views on fraud, bribery and corruption

One-fifth of respondents said their companies were either understating expenses or overstating revenue. Among board directors and senior managers, 42 percent were aware of irregular financial reporting in their company.

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Corporate officials in emerging market countries reported more of that activity than did officials in developed countries.

More than half of respondents in Nigeria (68 percent), Slovenia (66 percent), Russia (61 percent), Spain (61 percent), Croatia (58 percent), India (54 percent), Serbia (54 percent), Kenya (53 percent) and Austria (51 percent) said their companies "often report their financial performance as better than it is."

As for the "clean" countries, less than a quarter of corporate officials in Finland (7 percent), Norway (10 percent), Switzerland (16 percent), France (16 percent), Romania (17 percent), Sweden (18 percent), Hungary (19 percent) and the Netherlands (23 percent) reported corruption in their companies.

In general, the responses showed that corruption and bribery are infrequent in Scandinavia, but frequent in some countries in Southern and Eastern Europe, India, the Middle East and Africa.

Ernst reported a "corruption perception gap" in many countries. That means respondents thought corruption was much more widespread in other sectors than their own.

"For U.S.-based executives responsible for businesses in these regions, such findings should be cause for concern," said Brian Loughman, Americas Leader of Fraud Investigation & Dispute Services at Ernst & Young. "The possibility of inaccurate financial reporting to headquarters, or corrupt payments being made to secure sales, undermines the parent company and could expose it to enforcement action by regulators."

Estimates show that the cost of corruption totals more than 5 percent of global gross domestic product ($2.6 trillion), with over $1 trillion of bribes doled out each year, according to a study from the International Chamber of Commerce and several other groups.

"Corruption ... is the single greatest obstacle to economic and social development around the world. It distorts markets, stifles economic growth, debases democracy and undermines the rule of law," that report said.

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