Ethical standards in Asia worsening: poll

Just as China embarks on a massive Silk Road development funding initiative, a survey of business practices suggests corruption in Asia is only getting worse, adding potential potholes to new deals.

Despite anti-graft initiatives under way from China to India, the survey by EY—formerly known as Ernst & Young—found that “ethical standards are not improving.” Some 63% of respondents said that bribery or corrupt practices “happen widely” in their country, up from 60% in 2015. And 35% cited bribery as “common practice” to win contracts in their industry or sector, up from 31% in the 2015 survey.

“Compliance policies may be in place but, under pressure to deliver growth, some senior managers are ignoring unethical actions to achieve corporate targets,” Chris Fordham, the EY Asia Pacific leader for fraud investigation and dispute services, wrote in a report.

“To detect unethical behaviour with fewer resources, companies need to harness technology including, forensic data analytics.”

Perhaps most alarming, the survey suggested that the up-and-coming generation may have looser ethics than veteran staff.

The poll of 1,698 employees at large companies in 14 territories in the Asia-Pacific region was taken between November and February. EY said 39% were aged between 25 and 34.

“More than any other age group, millennials stood out as feeling justified in participating in a variety of ethically questionable behaviours,” EY said in a statement.

“Millennials feel more capable of justifying some of the unethical behaviours that we surveyed, and yet are more likely to leave an organization that’s involved in a fraud, bribery, corruption scandal,” Fordham told reporters in Hong Kong.

He said managers need to spend more time ensuring new workers understand “the need for compliant behavior

The online survey conducted by global consulting firm EY's Fraud Investigation and Dispute Services on about 1,700 employees from large companies across Asia-Pacific, said that young working adults of the region are more likely to condone dishonest methods in order to "win and retain business."

The report found that 38 percent of millennials or Generation-Y employees (defined as those aged 25 to 34 years old) would, if necessary, resort to "cash payments" to get ahead, compared to 28 percent of all respondents.

Forty-two percent of working millennials would also "extend the monthly reporting period to meet financial targets", higher than 31 percent of all others surveyed.

But the results do not mean that millennials are most likely to engage in fraudulent behavior. Millennials were found to be the age group least willing to work for an unethical employer, with 4-in-5 Generation-Y respondents indicating that they would seek another job should their current firm be embroiled in a fraud scandal.

A key reason for the disparity is that company policies on ethical behavior often are adhered to by millennials when explained clearly without a lot of jargon.

"Clearly the message is not getting through," Chris Fordham, APAC leader of the fraud unit, said on CNBC's Squawk Box, citing the lack of simplicity and consistency in policies.

"The employees don't understand it; they want to act compliantly, but they're struggling to understand the policies which are too full of jargon."

But millennials are not alone in finding compliance efforts by companies to be a ball of confusion.

Fordham said that while 93 percent of respondents felt that a robust compliance structure was key in deciding on an employer, 85 percent of them do not understand the policies in place, calling it "a wake up call for businesses."

Although more compliance policies and processes have been put in place over the past three years, the expanding investment in corporate compliance has not paid off, with an alarming 69 percent of respondents saying they have concerns about company misconduct.

He called for an overhaul in attitude towards tackling this lack of ethical conduct, "management needs to invest time and effort now to ensure that the level of understanding from the manuals is increasing if they want to ensure sustainability of their workforce," such as through creating simple and specific policies.

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