Business Forum • 29 July, 2024 at 1:46 PM
Standards of corporate integrity in companies around the world appear to be on the rise – buoyed by better guidance from management and more robust regulation. However, significant internal and external pressures on employee behaviors remain strong according to the EY 2024 Global Integrity Report, “How can trust survive without integrity?
The survey canvasses the views of 5,464 employees and board members across 53 countries and territories. It reveals that nearly half (49%) believe that integrity standards within their organizations have improved over the past two years; and that the majority (90%) are confident their colleagues do abide by relevant laws, codes of conduct and industry regulations.
The main drivers of this trend include increased direction from management (61%); stricter regulation and pressure from regulators and law enforcement (48%); demand from customers (37%), the general public (33%), and shareholders (26%); and pressure from employees (22%).
Pressures on integrity standards
Despite these improvements, half of respondents (50%) admit that it is challenging for their organizations to maintain integrity standards in difficult market conditions. Almost a third (30%) say the current macro-economic environment presents the greatest external pressure on employees to violate integrity standards; and more than a quarter (28%) say the biggest internal threat comes from employees not understanding the rules governing conduct.
Other external pressures on conduct raised by respondents include cyber threats (26%), health-related crises (22%), financial performance expectations (22%), supply chain disruptions (21%) and geopolitical threats (15%). Internal factors cited range from high employee turnover (26%) and a lack of resources (25%) to pressure from management (24%) and failure of financial processes or controls (20%).
The survey also shows that third parties are involved in more than two-thirds (68%) of significant compliance violations and major fraud.
Communications gap
The survey highlights a significant gap when it comes to communicating the importance of acting with integrity. More than half of board members (56%) and senior management (53%) surveyed say that they frequently hear leadership stressing the importance of ethical conduct, however, this drops to just a third (33%) for employees at more junior levels.
Varying standards of integrity
The survey also highlights a widely held perception that integrity standards across organizations can vary depending on rank, with senior employees often given greater leniency. Almost a third of respondents (31%) say that unethical behavior is tolerated when those involved are senior or high performers.
It also finds that board members are much more likely to have had concerns about potential misconduct that they did not report through a whistleblowing channel (43% compared with 19% of junior members of the workforce).
Creating an effective “speak-up” culture
The survey suggests that more needs to be done by organizations to create a safe “speak-up” culture for employees who identify wrongdoing. While the number of organizations without a whistleblowing hotline has halved since 2022, more than half of respondents (54%) who have used one say they faced pressure not to do so.
Senior leaders also tend to overestimate the progress they have made to create a positive “speak-up” culture in their companies. While 40% of board member respondents say it has become easier for employees to report their concerns, only 26% of employee respondents agree. Similarly, 33% of board member respondents believe that whistleblowers within their organization now have more protection, compared to just 14% of employees.
Clarisa Olteanu, leader of EY Romania Forensic & Integrity Services, stated: „Although the adoption of the whistleblower legislation and the implementation of reporting systems have supported those who wanted to report misconduct, many of our clients still struggle with the general reluctance of employees to report. They have invested in awareness campaigns to encourage employees to speak up, but with limited results. Companies will need to shift their efforts towards cultural transformation in terms of compliance and integrity, which requires tailored solutions adapted to the existing organizational culture, getting to the root cause and addressing it through constructive measures that can offer measurable results.”
Findings for Romania
- The EY Global Integrity Report shows an improvement in integrity standards in Romania, with guidance from management playing a crucial role in this regard
One of the contributing factors identified by 78% of respondents is that management has raised behavioral standards in their organizations over the past two years.
These efforts have led to a record level of trust, with 94% of respondents saying they are confident that their management complies with existing relevant laws, codes of conduct, and industry regulations.
At the same time, tolerance for unethical behaviors exhibited by senior or high-performing employees is decreasing, with only 27% of study participants indicating that such attitudes are still accepted in their organizations, a decrease of 10 percentage points from the results in 2022.
Clarisa Olteanu: „These results are a testament to the extensive efforts that have been made in the last few years in raising the bar on integrity and ethical conduct, in a more vigilant corporate landscape. There is of course still room to grow, but cultural transformation is a long-term strategy and the improvement we have seen just in the last two years gives us confidence that we are on the right track.”
- Companies' efforts to emphasize ethics and integrity have results, but there is still room for improvement
Nearly half of the participants (45%) recognize their companies' efforts to implement training programs dedicated to ethics and integrity in business and professional life. In addition, 42% mentioned that their companies implement disciplinary measures when they identify behaviors that do not demonstrate integrity. Compared to 2022, these figures show an increase in the adoption of training and discipline measures, from 43% and 40%, respectively.
- Employees are still reluctant to use whistleblowing channels, with the main reason cited being loyalty to their colleagues
Only 21% of respondents have used a whistleblowing channel in the past two years, compared to 36% in 2022, although protection for whistleblowers has improved at national level with the adoption of Law No. 361/2022 (Whistleblowing Law). Moreover, 39% of respondents mentioned that it has become easier for employees to report misconduct in their organization.
When asked why they did not report their concerns, 35% of study respondents cited as main reason their loyalty to colleagues, a significant paradigm shift compared to 2022 when 53% of respondents felt that their concerns would not be acted upon.
- Although the perception of management integrity has improved, tolerance for unethical behavior by colleagues raises questions
Thus, 90% of respondents expressed confidence that employees in their organizations abide by relevant laws, codes of conduct, and industry regulations, a percentage equal to the global average. However, compared to 2022 (95%), the current percentage of 90% indicates a slight decrease in the level of trust in the ethical behavior of employees. Moreover, 29% of respondents from Romania stated that, to improve their career, they would engage in at least one unethical behavior, an increase compared to 2022, when only 23% had declared this.
These results could indicate the need for additional efforts to further improve organizational culture and to maintain the focus on ethics and integrity.
- ESG regulations represent new integrity challenges
Regarding the challenges related to compliance with ESG regulations, 32% of respondents from Romania see compliance with new ESG regulations and the inconsistent or inaccurate data used to measure progress towards performance targets and for ESG reporting in files and public statements as a major challenge, slightly below the global average of 37%.
According to 32% of respondents, in the process of becoming compliant with ESG reporting requirements, organizations in Romania prioritize hiring of external consultants for legal advice.
These data underline that, although there is a high level of trust in the ethical behavior of employees and third parties in Romania, challenges and areas for improvement persist, especially regarding tolerance for unethical behavior by colleagues and the implementation of ESG initiatives.