Corruption is an ongoing problem that many in business acknowledge is all around them.
Ernst & Young’s annual international fraud survey, which covers Europe, the Middle East, India, and Africa, found that 42% of board directors and senior managers are aware of some sort of irregular financial reporting, that more than half of respondents think corrupt practices are “widespread” in their country.
And many of the pressures and oversights that cause corruption have intensified.
Managers are under large and growing pressure to deliver results in an environment that’s not particularly friendly. When you can’t deliver results on your own, you’re more likely to try to fudge the numbers, overlook over reported numbers from employees, or avoid calling out things like bribery:
A few psychological points support that. First, pressure causes “tunnel vision,” a singular focus on results that pushes ethical considerations aside. Additionally, accepting small nudges of numbers once can make people more inclined to let larger fraud happen later.
Additionally, there’s steady downward pressure on wages, which can increase the incentives for fraud.
The combination is particularly worrisome. Direct pressure to provide results and worries about personal compensation can lead to increasing fraud.
Further, there’s a serious and worrying gap between the way management and employees on the ground see efforts to stop corruption. Managers tend to overrate how effective compliance problems are compared to their employees, and are more inclined to believe that employees can safely come forward than the people that are expected to actually do so.
And though many are willing to acknowledge the problems of corruption in their industry or country, they tend to deny it in their own companies.
The combination of pressure, greed, and a “see no evil” attitude creates small problems that can turn into big ones.
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