Czech fraud survey results ‘sad indication’

Czechs at large companies say corruption is widespread, don’t see benefits to ethical behavior and have little faith in regulators

Raymond Johnston | 25.05.2011
Almost a quarter of Czech respondents fromt he business sector are willing to offer cash bribes to win business

Corruption in Czech business sector is seen as widespread by eight out of 10 employees for large companies surveyed by consultancy Ernst & Young for “European Fraud Survey 2011: Recovery, Regulation and Integrity.” That figure is above the European average of 62 percent. Czech respondents were less also likely than others in Europe to see the benefits of ethical conduct or a positive corporate reputation.

In the Czech Republic, 23 percent said they are willing to offer cash payments as bribes. While this is above the 18 percent average, the country is by no means the leader. Greece was on top with 44 percent followed by Russia and Turkey. At the lower end of the scale, France, Norway, Poland and Italy were all below 10 percent.

More than two-fifths of Czech managers said that offering entertainment to win or retain business is justifiable. One-third would be willing to consider giving cash payment. The European average for both of these categories is 17 percent. In addition, 39 percent of Czechs said that it was common practice in their area of business to obtain contracts through bribery, compared the the European average of 28 percent.

Corruption in the Czech Republic is widespread

Just 30 percent of respondents from the Czech Republic said they were sure that the company they work for had not engaged in fraud in the previous two years, but interest in stopping fraud seemed low, with just one-fifth of respondents saying the company they worked for had increased its anti-fraud efforts.

“Although anti-corruption measures are increasing, they seemingly do not have an appropriate impact on employees and their perception of unethical conduct of management. Employees believe that unethical conduct is tolerated more than ever and a focus on anti-corruption measures is declining. Reinvigorating the commitment by management and their boards to ethical growth should therefore be an urgent priority, and will be appreciated by employees and stakeholders alike,” Magdalena Souček, country managing partner of Ernst & Young in the Czech Republic, said in a press release. ‘When it comes to maintaining ethical standards, management is not setting a good example for employees.’

The Ernst & Young report also showed that some 54 percent of Czech managers and board members were willing to make ethical compromises to ensure their companies met financial goals during tough economic conditions.

“When it comes to maintaining ethical standards, management is not setting a good example for employees. A third of Czech respondents do not believe that management behaves honestly and ethically. No wonder: Only 18 percent of respondents in management roles reject unethical conduct as a means to meeting financial targets,” Tomáš Kafka, a senior manager in Ernst & Young’s fraud investigation and disputes services in the Czech Republic, said in the press release.

Management makes ethical compromises to meet growth goals

People in the Czech business sector would like to see something done, but have little confidence. Some 83 percent of Czechs want stricter regulator and government oversight. But just only 6 percent say they believe regulators are willing and able to prosecute corruption effectively, and 41 percent said regulators are unwilling to prosecute bribery and corruption cases.

One reason that the situation remains unchanged is that many managers don’t see any benefits from morality. Compared to the European average of 66 percent, significantly fewer Czech respondents — 37 percent— said there is a commercial advantage in a strong corporate reputation for ethical conduct.

“This result is a sad indication of the state of economic competition in the Czech Republic, and underlines potential inefficiencies in resource allocation in the Czech economy,” Kafka said.

Ernst & Young conducted a total of 2,365 interviews with employees in 25 European countries in January and February 2011 either by telephone, online or in person. Those interviewed worked for companies that were either stock exchange listed, multinational or employed more than 1,000 people. Interviews were conducted using local languages in all countries. There were 101 respondents from the Czech Republic. 

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