Europeans reluctant to blow the whistle

Internal Auditor, August, 2007 by D. Clemmons

EUROPEAN WORKERS ARE AFRAID TO BLOW THE WHIStle on unethical behavior, according to a recent survey from Ernst & Young (E & Y). A Survey Into Fraud Risk Mitigation in 13 European Countries reports that employees in Europe find their employers' anti-fraud policies lacking. Many fear reprisals, and the overall findings show personnel see a disconnect between the perceived and real procedures on reporting improprieties. E & Y polled 1,300 employees who work at multinational companies.

Although all U.S.-listed companies and their subsidiaries are required to have an anonymous whistleblower hotline for employees and third parties to report unethical behavior, these hotlines are far less common in Europe. Only 38 percent of European respondents say their company has a hotline, while a little more than half of total respondents say they believe people actually use hotlines.

Even with an established policy for reporting improprieties, one in five respondents say people at their companies are afraid to speak up, the survey notes. More than 80 percent cite fear of reprisal as the reason they won't come forward. In France, 39 percent of respondents say they do not feel secure in whistleblowing, while in the United Kingdom, 86 percent of those polled say they would have no problem doing so.

"The huge differences come down to culture, legislation, and regulation in each country," says John Smart, fraud investigation and dispute services partner at E & Y in the United Kingdom. "Despite plenty of evidence to show that whistleblowers are one of the best ways to identify and stop fraud, many employees in Europe fear reprisals, even loss of employment, if they do blow the whistle."

Overall, 42 percent of respondents' companies do not have any formal anti-fraud policies or procedures in place. However, most employees surveyed say they would rather work in an organization that has a definite set of guidelines to help them make the best choice when faced with a difficult situation. The report concludes that some of the best practices in managing business fraud and unethical behavior are establishing a unilateral code of conduct, training and awareness, and a trusted means of communication such as a hotline. A specific chain of reporting is also a key factor in increasing employee confidence in the organization's anti-fraud efforts.

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Nine out of 10 respondents say companies should have a code of conduct to address fraud, bribery, and corruption, the survey reports. In Western Europe, 67 percent of respondents say their company has a code, while in Central and Eastern Europe only 53 percent of the respondents' companies have one. "If a UK company, for example, is considering establishing a presence elsewhere in Europe," Smart says, "it should not automatically expect employees to behave in the same way as those at home."

Smart notes that there is massive support and commitment from employees to anti-fraud programs and robust codes of ethical conduct. He says it is important for employees to know the company will hold everyone to the same set of standards, regardless of the cultural norms and business practices that might vary from country to country. "Good education and awareness programs will help, but in the final analysis it is how the company and its leadership behave that sets the standard for the whole organization," he adds.

To obtain the full report, or to read country-specific results, visit www.ey.com.