Firms 'need to be seen to penalise' corruption

IRISH BUSINESSES need to be seen to penalise employees for breaching internal guidelines on corruption and bribery, according to one expert.

Ernst Young’s global fraud survey, published yesterday, shows that 28 per cent of Irish executives with responsibility for corporate compliance believe bribery and corruption have increased since the economy went into recession.

Julie Fenton, head of the firm’s fraud investigation and disputes services practice, pointed out that most Irish businesses have good internal procedures and frameworks in place for dealing with these risks.

However, she said one point that stood out in the survey was that only 28 per cent of Irish respondents believed people were penalised for breaking companies’ guidelines and internal policies.

On average, 56 per cent of western European respondents believed this to be the case.

Ms Fenton suggested that this was not because employers did not sanction workers who broke the rules, but rather because they tended to do it quietly.

“I certainly do think that companies are taking action,” she said. She added that employers should not simply take action in these circumstances, they should also be seen to be taking it.

Another area in which Irish respondents differed slightly from their European counterparts was that two-thirds of them considered it justifiable to provide entertainment to win or retain business, while just 26 per cent of their European counterparts, and 50 per cent of their British peers, did so.

Ms Fenton argued that areas such as corporate entertainment required clear guidelines, governing areas such as the type of entertainment, the intention behind providing it and where it occurred in the business cycle.

Recessions can help create conditions that encourage corrupt behaviour, Ms Fenton explained. “There are three elements,” she said.

“The first is pressure – and people are definitely under pressure. The second is monitoring: there are fewer people doing more work, so there is less monitoring and so more opportunity.

“The third is rationalisation: people have taken salary cuts or are doing more work, so they think it ‘It’s okay to fiddle my expenses’.”

But, on the upside, she pointed out that downturns can also expose corrupt behaviour: as companies scrutinise spending more carefully, they can pinpoint unusual or suspicious transactions.