More businesses not bothered by being corrupt: E&Y study

Fifteen percent of chief financial officers are willing to make a cash payment to win business up from 9% when surveyed a year ago,  according to a recent report by Ernst & Young.

The 12th Global Fraud Survey found an overall uptick in bribery and corruption. The report authors speculate that the economic uncertainty may contribute to the slide in ethics.

The study was compiled from 1,700 interviews in 43 countries that started in Nov. 2011 and wrapped up in Feb. 2012.

Around 5% of respondents thought it was OK to misstate financial performance compared to 3% in the last survey.

On a global basis, 39% of respondents reported that bribery or corrupt practices occur frequently in their countries.

Developing countries face high levels of corruption:

• In Brazil 84% of the respondents said that corruption was widespread.
• In Indonesia, 60% of respondents consider making cash payments to win new business acceptable.
• In Vietnam, 36% of respondents consider it acceptable to misstate a company’s financial performance.

The E&Y study singled out miners where offset obligations could be a concern:

Foreign companies are often obliged to make investments in local projects as a condition of being awarded a contract. These offset obligations are particularly common in defense, oil, gas or mining contracts with African states. Offset obligations almost always involve negotiations with government officials and, since the sums involved are often large, they can be used as a covert way of paying bribes.

Regulators are increasingly focusing on these transactions. Additionally, the US Dodd-Frank Act imposed new disclosure requirements on US-listed companies and other jurisdictions, like the EU and UK, are considering similar measures.

Image on a billboard in Zambia taken by Lars Plougmann