Covid-19 accelerates unethical behaviour in corporates

India: A significant number of employees including seniors in corporate India are willing to act unethically for personal financial gain in these times and the global pandemic is only exacerbating this by increasing the incentives and opening new avenues for them to do so, a new report said on Thursday.

Senior employees are more likely to justify unethical behaviour such as ignoring misconduct in their team, misleading external parties or offering/accepting a bribe to boost their own career progression or remuneration.

"Covid-19 and the ensuing economic crisis will uncover their unethical behaviour and actions, leaving organisations exposed to the threat of reputational damage and financial losses," said EY's 'Global Integrity Survey 2020'.

Over one third of the respondents believe that unethical behaviour will increase further. The survey said that 64 per cent believe that unethical behaviour is often tolerated when involving seniors or high performers.

"As tough decisions are being taken amid the crisis, the risk of unethical behaviour and compliance infractions has increased and can weigh heavily on organisations," said Arpinder Singh, Partner and Head - India and Emerging Markets, Forensic & Integrity Services, EY.

"Turbulent times like these can have corporate integrity becoming a true differentiator as organisations concentrate on encouraging ethical conduct, building trust in third party partnerships, protecting data and circumnavigating the risks present now, next and beyond," he added.

Declining financial performance (37 per cent), disruption to traditional working patterns (36 per cent), reduced focus on ethical behaviour from senior management (34 per cent) and weakening compliance processes and controls (20 per cent) are some of the greatest risks to ethical business conduct because of the pandemic.

Nearly 69 per cent in India believe that there are managers in the organisation who would sacrifice integrity for short-term financial gain. The figure is higher than the global figure which stood at 43 per cent.

While 57 per cent would be prepared to act unethically to improve their career progression or remuneration package, 32 per cent would be willing to falsify customer records, 31 per cent would ignore unethical conduct by third parties and 29 per cent would provide false information to management, the findings showed.

However, 77 per cent stated that integrity standards have improved in their organization in the last two years and 90 per cent said it is important to be able to demonstrate that their organization operates with integrity.

"However, 92 per cent say they would be concerned if information about decisions taken by management were subject to public scrutiny, much higher that global (54 per cent)," said the EY survey.

Organizations can face significant risk during mergers and acquisitions (M&A), joint ventures, when partnering with or investing in other businesses.

As investors start to look again to the emerging markets for greater returns, it is important to remember that integrity plays a significant role in M&A due diligence. Globally, 95 per cent of respondents said integrity-related risks are among the most significant when undergoing a transaction. According to respondents from India, future commercial viability (27 per cent), management's integrity at the acquired organization (24 per cent) and fraudulent business activities (21 per cent) are some of the key risks in M&A.