If FCPA and related statistics are your thing, this post is for you as it summarizes two recent surveys – the first by Ernst & Young, the second by Dow Jones.
Ernst & Young
Ernst & Young Fraud Investigation and Dispute Services recently released (here) its 12th Global Fraud Report.
The foreword section of the report states as follows. “Though many companies have intensified their efforts to combat bribery and corruption, especially given the aggressive enforcement environment, our research shows that much remains to be done. Executives, especially those in many mature markets, must overcome a certain degree of institutional fatigue about anti-corruption compliance initiatives. This is especially critical given that this year’s survey shows that tolerance for unethical conduct has increased in the last two years.”
Findings of note from the report include the following.
“Bribery and corruption remain pervasive. On a global basis, 39% of respondents reported that bribery or corrupt practices occur frequently in their countries. The challenge is even greater in rapid-growth markets, where a majority of respondents believe these practices are common.”
Survey respondents were asked – “which of the following can be justified if they help a business survive an economic downturn.” 30% said that “entertainment to win / retain business” can be justified; 15% said that “cash payments to win / retain business” can be justified; and 16% said that “personal gifts to win / retain business” can be justified.
“As many as 42% of respondents had not received training on ABAC (anti-bribery / anti-corruption) policies. Without adequately trained employees, the ability of companies to identify issues or robustly investigate and act on allegations is also likely to be diminished.”
“[D]espite the significant risks and specified demands of regulators [as to third parties], our survey suggests that the corporate response to mitigating third-party risks is still inadequate. Many companies are failing to adopt even the most basic controls to manage their third-party relationships.” “Effective third-party management does not end at the performance of due diligence. Third parties also should be monitored on an ongoing basis, including regular compliance assessments and audits. It is therefore worrying that only 45% of respondents identified audit rights or regular audits of the third party as a process in place to monitor the relationship.”
The report also contains a specific section regarding CFO responses.
Findings of note from this section include the following.
CFO survey respondents were asked – “which of the following can be justified if they help a business survive an economic downturn.” 34% said that “entertainment to win / retain business” can be justified; 15% said that “cash payments to win / retain business” can be justified; and 20% said that “personal gifts to win / retain business” can be justified.
“Only 46% of CFO respondents had attended ABAC training” “16% of CFO respondents do not know that their company can be held liable for the actions of third-party agents.”
As to corporate governance issues, the report states as follows.
“Our survey respondents suggest that not all boards are seen to be doing enough to properly understand the way their company is conducting business. Globally, 52% of c-suite interviewees think that the board needs a more detailed understanding of the business if it is to be an effective safeguard against fraud or corrupt practices.”
As to methodology, the report states as follows. “We interviewed chief financial officers and heads of legal, compliance and internal audit, to get their views of fraud, bribery and corruption risk and how their organizations are mitigating them.” “More than 1,700 interviews were conducted in 43 countries between November 2011 and February 2012.”
Ernest & Young Fraud Investigation and Dispute Services (here) provides, among other things, anti-fraud and corporate compliance services.
I note in “Revisiting a Foreign Corrupt Practices Act Compliance Defense” (here) that amending the FCPA to include a compliance defense will advance certain policy objectives such as better incentivizing more robust corporate compliance, reducing improper conduct, and thus best advancing the FCPA’s objective or reducing bribery. In the article, I cite various survey data and note that despite current incentives to implement robust FCPA policies and procedures (namely the DOJ’s Principles of Prosecution and the Sentencing Guidelines) business organizations are not sufficiently implementing comprehensive FCPA policies and procedures. I argue that these present incentives thus represent “baby carrots” when what is needed to better incentivize more robust FCPA compliance are real “carrots.” An FCPA compliance defense is a real “carrot” that will better incentivize compliance across the business landscape. Organizations with existing FCPA compliance policies and procedures will be incentivized to make existing programs better. Likewise, organizations currently without stand-alone FCPA policies and procedures will be incentivized to spend finite resources to implement FCPA compliance policies and procedures.
An FCPA compliance defense will surely not cause all FCPA survey data to yield 100% outstanding results, but I do think it is reasonable to conclude that an FCPA compliance defense will cause various FCPA survey responses, such as those discussed above from the Ernst & Young report, to yield higher positive results, help reduce improper conduct, and thus best advance the FCPA’s objective of reducing bribery.
Dow Jones Risk & Compliance recently released (here) its 2012 State of Anti-Corruption Survey.
A finding of note is the following.
“The survey revealed an increase from 2011 in the percentage of companies that have stopped or delayed … entrance or expansion in emerging markets (48% and 47% of those surveyed, respectively) due to concerns about violating regulations.”
As noted in Dow Jones graphical summary, the 48% breaks down as follows (17% stopped; 31% delayed); the 47% breaks down as follows (14% stopped; 33% delayed). As noted in Dow Jones graphical summary, the issue posed was “impact of concern about breaking regulations.” It is unclear from the survey results what is meant by “regulations” – for instance, survey respondents are from North America, Western Europe and Asia-Pacific meaning some respondents are likely to work for companies not subject to the Foreign Corrupt Practices Act.
Previously on the FCPA Blog (here), Professor Andy Spalding responded to the above finding from the Dow Jones survey.
As to methodology, the Dow Jones survey states as follows. “The survey is based on interviews with more than 300 compliance professionals at companies across key industries worldwide.”
Dow Jones Risk & Compliance (here) provides anti-corruption compliance services.