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8/4/2019 CFO State of Ethics
http://slidepdf.com/reader/full/cfo-state-of-ethics 1/24
C IngIy CIC
Au rr ruAb®
he State of thics
and omliance in AsiaA Cross-Country Analysis
July 2011
8/4/2019 CFO State of Ethics
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Fwk F b CnvsIns
The mission of The Corporate Executive Board is to create revolutionary economic advantage for leaders of the world’s great enterprises by enabling them to act with unparalleled
intelligence and condence. We lift their performance at key decision points and career moments by delivering insight drawn from the most powerful global executive and professional
network. When we bring leaders together, it is crucial that our discussions neither restrict competit ion nor improperly share inside information. All other conversations are welcomed and
encouraged. We look forward to the continued and robust sharing of insights by member executives and professionals at Corporate Executive Board events.
CIs nd CyIgh
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The pages herein are the property of The Corporate Executive Board Company. Beyond the membership, no copyrighted materials of The Corporate Executive Board Company may
be reproduced without prior approval.
LgL Cv
The Audit Director Roundtable has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from many sources, however, and
the Audit Director Roundtable cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the Audit Director Roundtable is not engaged in rendering legal,
accounting, or other professional services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services
are advised to consult an appropriate professional. Neither The Corporate Executive Board Company nor its programs are responsible for any claims or losses that may arise from a) any
errors or omissions in their reports, whether caused by the Audit Director Roundtable or its sources, or b) reliance upon any recommendation made by the Audit Director Roundtable.
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KEY FINDINGS
■ Many employees in Asia are unsure if they have observed misconduct. The proportion of “don’t know”responses is up to four times higher in Asian countries than in the nited States, which raises concerns
that employees might not be well equipped to spot misconduct.
■ Fewer employees in Asia who do observe misconduct report it. Among sta who say they have observed
misconduct, reporting rates on average across Asia are 12 percentage points lower than the global average
(46% versus 58%).
■ Fear of retaliation tops the list of reasons for not reporting. Consistent with the global trend, “fear of retaliation”
is the most important reason for not reporting misconduct in Asia too. The belief that the observer lacks enough
information about the misconduct is another key reason for nonreporting.
■ Managers are seen as poor role models. Managers in most Asian countries are seen to be far more likely
to pressure their sta to act unethically as compared to their global peers.
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4
RISKCARIY SREY SED ASSESS E DRIERS
F INEGRIY A CMANIES
RiskClarity
Employee Survey and Scale
Multiple IndustriesParticipating companies represent the following industries:Automotive and Transport, Business Services, Chemicals,
Computer Software, Electronics, Energy and tilities,
Entertainment/eisure, Financial Services/Banking,Health Care, Insurance, Manufacturing, Technology,
Telecommunication Services, and Retail.
All Business FunctionsRespondents represent all business functions, includingCorporate Administration, Customer Service, Human
Resources, Finance/Accounting, Information Technology,
egal, Manufacturing, Market Research, perations, QualityControl, Retail, Sales, Corporate Strategy, and Supply Chain.
All Employee evelsEmployees at all levels, from the CE and senior
management to middle management andfrontline employees
an-Asian CoverageDeep set of responses from across India, China, Malaysia,
Singapore, and Indonesia
Key Demographics of Survey articipants to Date
Survey Statements
Strongly
Agree Agree
Slightly
Agree Neither
Slightly
Disagree Disagree
Strongly
Disagree
I can report unethical behavior or
practices without fear of retaliation.
My company responds quickly and
consistently to veried or proven
unethical behavior.
I am often exposed to situations that
could lead to inappropriate conduct.
CEB’s Compliance and
Ethics eadership Council
(CEC) has developed
the RiskClarity survey
that allows companies
to rigorously assess
their ethical culture andbenchmark it against
peers.
■ pproximatel 30,000
emploee rom 15 coutrie
i ia ae complete te
iClarit sure.
■ i report ocue o
repoe rom Cia, Iia,
alaia, Ioeia, a
siapore.
rprA gry prA
Note: All questions were coded or recorded in such a way to directionally be on the same scale.
1
3
2
4
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RAD MA FR E RESENAIN
eporti
o icouct
bservation
of Misconduct
erormace o
select drier o
Corporate Iterit
roram eource
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6
IG RRIN F EMYEES IN ASIA NSRE
F AING BSERED MISCNDC
ercentage of Employees
igh levels of “Don’t
Know” responses suggest
that employees across
Asian countries are
not good at spotting
misconduct.
■ e iailit to pot
micouct coul e
ecaue:
– mploee’ perceptio
reari te clarit o
uielie i ot accurate;
– mploee lac te ill
to pot micouct; a
– tical uielie are
iaequate i elpiemploee pot iferet
orm o micouct.
■ mploee i Cia are te
ort i term o potti
micouct, it “o’t
o” repoe oer our
time te Uite state rate.
■ e percetae o
emploee ot aioere micouct arie
etee 48% a 65% i
ia a compare to 75%
i te Uite state o
merica.
n = 131,089 nited States; 9,745 nited Kingdom; 12,753 India; 7,551 China; 2,087 Singapore; 1,874 Malaysia; 399 Indonesia.
Don’t Know
Have bserved Misconduct
Have Not bserved Misconduct
nitedStates
nitedKingdom
China Malaysia IndiaIndonesia Singapore
Source: CEC RiskClarity Survey Data, 2009–2010.
75%
15%
10%
80%
12%
8%
48%
8%
44%
52%
17%
31%
55%
17%
28%
62%
12%
26%
65%
12%
23%
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7
CNFIC F INERES E MS CMMN YE
F MISCNDC BSERED IN ASIA
bserved Misconduct by ype
Percentage o Respondents Who Report Having Observed a Specifc Type o Misconduct
R–related misconducts
like preferential
treatment and
inappropriate behavior
are most common
globally, but conict of
interest is more commonin Asia.
Source: CEC RiskClarity Survey Data, 2009–2010.
Note: The list of top ve observed misconducts by country is included in the appendix.
Asia Average
lobal Average
M i s u s e o f r g a n i z a t i o n s
T i m e o r R e s o u r c e s
H a r a s s m e n t
I n a p p r o p r i a t e B e h a v i o r
D i s c r i m i n a t i o n
S t e a l i n g o f C o m p a n y
P r o p e r t y
P r e f e r e n t i a l T r e a t m e n t
A l c o h o l a n d / o r D r u g A b u s e
I m p r o p e r S a l e s
I n a p p r o p r i a t e i v i n g o r
R e c e i v i n g
A c c o u n t i n g I r r e g u l a r i t i e s
I m p r o p e r P a y m e n t s
I n s i d e r T r a d i n g
V i o l a t i o n o f H e a l t h o r
S a f e t y P o l i c y
D a t a P r i v a c y o r I n f o r m a t i o n
S e c u r i t y V i o l a t i o n
V i o l a t i o n o f E n v i r o n m e n t a l
R e g u l a t i o n
B u s i n e s s I n f o r m a t i o n
V i o l a t i o n
F r a u d
C o n i c t o f I n t e r e s t
0%
2%
4%
6%
8%
10%
12%
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RAD MA FR E RESENAIN
Reporting
of Misconduct
eratio
o icouct
erormace o
select drier o
Corporate Iterit
roram eource
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32%
41%
49%
51%
56%
MS MISCNDC GES NRERED IN ASIA
Reporting Rate of bserved Business Misconduct
Percentage o Respondents Who Reported Observed Misconduct
Reporting rate of
business misconduct in
Asia is much lower than
the global average.
■ mploee i Cia a
alaia are te ort
i term o reporti
micouct.
n = 4,538 India; 3,962 China; 905 Malaysia; 809 Singapore; 182 Indonesia.
China Malaysia Singapore India Indonesia
Asia Average
= 46%
Global Average
= 58%
Source: CEC RiskClarity Survey Data, 2009–2010.
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10
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
FEAR F REAIAIN REASN FR N
RERING MISCNDC IN ASIA
op-hree Reasons for Not Reporting Misconduct
Percentage o Employees
Fear of retaliation in Asia
is much lower than the
global average, but is
nevertheless the main
reason for not reporting.
■ i umer o emploee
i ia o ot report
micouct ue to lac
o iormatio; te ia
aerae o ti imeio
i eit percetae poit
ier ta te loal
aerae.
Singapore
China
Malaysia
India
Indonesia
lobal Average
Asia Average
rganizational Imperative
Provide more anonymous channels for reporting, assuring employees of condentiality and appropriate action against
reported misconduct.
Fear of Retaliation I Did Not Think the CompanyWould Do Anything About ItI Did Not Think I Had EnoughInformation About the Misconduct
37%
24%
49%
16%15%
20%
n = 12,753 India; 7,551 China; 2,087 Singapore; 1,874 Malaysia; 399 Indonesia.
Source: CEC RiskClarity Survey Data, 2009–2010.
Note: The list of top-ve reasons for not reporting misconduct by country is included in the appendix.
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0%
10%
20%
30%
40%
50%
60%
70%
80%
India
Indonesia
Singapore
Malaysia
China
lobal Average
Asia Average
rganizational Imperative
Educate managers on how to address, report, and escalate issues related to misconduct.
My Supervisor/Manager A Superior therThan the ManagerHuman Resources
70%
23%
20%
21%
25%
72%
n = 4,538 India; 3,962 China; 905 Malaysia; 819 Singapore; 192 Indonesia.
DIREC MANAGERS REFERRED CANNE RER
MISCNDC
op-hree referred Channels to Report Misconduct in Asia
Percentage o Employees
Misconduct is more than
three times more likely to
be reported to managers
than through the next
most preferred channel
(R).
■ mploee i alaia
are more liel to report
micouct to h ta
teir couterpart i oter
coutrie.
Source: CEC RiskClarity Survey Data, 2009–2010.
Note: The list of top-ve preferred channels for reporting misconduct by country is included in the appendix.
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RAD MA FR E RESENAIN
eporti
o icouct
eratio
o icouct
erformance on
Select Drivers of
Corporate Integrity
roram eource
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13
89%
83% 82%
78%
69%
CARIY F EICA GIDEINES SIMIAR GBA
AERAGE
Clarity of Guidelines
Percentage o Respondents1 Who Believe Ethical Guidelines Have Been Clearly Communicated to Them
Employees in most Asian
countries report clarity of
ethical guidelines close
to global average.
■ Iia, siapore, a Cia
core ell o clarit o
uielie, ee tou te
report relatiel i “do’t
ko” core o oeratio
o micouct.
India China IndonesiaSingapore Malaysia
Global Average
= 84%
Asia Average
= 83%
n = 12,753 India; 7,551 China; 2,087 Singapore; 1,874 Malaysia; 399 Indonesia.
Source: CEC RiskClarity Survey Data, 2009–2010.
1 Respondents who selected “Agree” and “Strongly Agree” to the question on clarity of guidelines.
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ASIAN MANAGERS RESSRE EIR SAFF AC
NEICAY
ercentage of Respondents1 Who Believe hey Are ressured by heir Managers to erform nethical
Job-Related asks
Percentage o Responses rom Non-Management Sta
Managerial pressure to
act unethically is higher
in Asia than global
average.
IndiaChina Singapore Malaysia Indonesia
n = 15,070 India; 10,608 China; 2,396 Singapore; 2,124 Malaysia; 396 Indonesia.
4%
9%
15%
20%
25%
Asia Average
= 8%
Global Average
= 3%
1 Respondents who selected “Agree” and “Strongly Agree” to the question on manager pressure.
Source: CEC RiskClarity Survey Data, 2009–2010.
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15
77%
67%64%
61%
51%
75%
66% 61%57%
50%
Asia Average
= 68%
ERCEIN F SENIR EADERS IN ASIA SIMIAR
GBA AERAGE B ARIES BY CNRY
ercentage of Respondents1 Who Believe the Senior eaders at heir rganization Are onest
and ossess Integrity
he perception of senior
leaders varies widely
across Asia, with India
and Singapore faring the
best.
■ l arou oe-al o te
repoet i alaia a
Cia eliee teir eior
leaer are oet a
poe iterit.
■ imilar percetae
o repoet eliee
tat eior leaer i
alaia a Cia ail to
tae ecear actio o
oeri micouct.
rganizational Imperative
Set the right tone at the top, ensuring senior leaders hold the highest ethical standards and ascertain that these
standards permeate the organization while remaining comprehensible across all levels.
India
India
Indonesia
Indonesia
China
China
Singapore
Singapore
Malaysia
Malaysia
ercentage of Respondents2 Who Believe the Senior eaders ake Appropriate Action on bserving
nethical ractices
Asia Average
= 66%
n = 12,753 India; 7,551 China; 2,087 Singapore; 1,874 Malaysia; 399 Indonesia.
n = 12,753 India; 7,551 China; 2,087 Singapore; 1,874 Malaysia; 399 Indonesia.
1 Respondents who selected “Agree” and “Strongly Agree” to the question on senior leaders’ honesty and integrity.
2 Respondents who selected “Agree” and “Strongly Agree” to the question on senior leaders’ response to observing unethical practices.
Source: CEC RiskClarity Survey Data, 2009–2010.
Global Average
= 63%
Global Average
= 62%
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RAD MA FR E RESENAIN
eporti
o icouct
eratio
o icouct
erormace o
select drier o
Corporate Iterit
rogram Resources
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NEX SES
Suggested Actions to Build an Eective Anti-Fraud rogram
Fraud Risk Assessment
■ Conduct a Fraud Risk Assessment
Implement a comprehensive fraud risk assessment to identify, measure, and evaluate key fraud risks and related internal controls.
■ Identify Frauds During an Audit Engagement
Incorporate fraud prevention and detection techniques into every audit to broaden coverage of this risk.
bservation
of Misconduct
Awareness and raining
■ Assess Fraud Awareness
se surveys and interviews to test awareness in the organization and ensure that employees understand what constitutes fraud
and the various reporting mechanisms available to them.
■ Conduct Fraud raining
Aid in the creation of a comprehensive fraud training program that delineates all major fraud scenarios as well as all consequences
for fraudulent activity and behavior.
erformance on
Select Drivers of
Corporate Integrity
otlines and Investigations
■ Develop a Whistleblower otline
Expedite fraud-related whistleblower tips to ensure that important fraud leads are appropriately prioritized and acted on.
■ Escalate Incidences to Investigations
Implement a more proactive, tiered fraud-reporting structure that collects appropriate amounts of information and provides
for timely escalation and resolution of fraud issues.
Reporting
of Misconduct
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RECMMENDED RESRCES
Select Resources from ADR to elp Build an Eective Anti-Fraud rogram
■ Reynolds American’s Evaluation of typical fraud risks during every audit
■ Fraud Risk Database to help develop potential fraud scenarios during the audit engagement
■ Fraud Prevention and Detection Survey Tool that helps identify high-risk areas requiring in-depth fraud examinations
■ BNSF’s process to outline fraud risk assessment objectives and methodologybservation
of Misconduct
■ Fraud Awareness Training Presentation that helps educate the business to create fraud awareness
■ Fraud Detection Skills as developed by Dow
■ Fraud Prevention and Detection Survey Tool that helps perform an assessment of gaps in fraud control practices■ Fonterra’s Fraud Awareness Checklist to enable management to assess and manage fraud risk on an ongoing basiserformance on
Select Drivers of
Corporate Integrity
■ BP’s Process to expedite the fraud communication process
■ eorgia-Pacic’s Tools for whistleblower employees to collect useful, actionable fraud information
■ Nextel’s Development of a whistleblower hotline
■ Whistleblower Policy enerator to help produce a whistleblower policy for your organizationReporting
of Misconduct
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Aendix
erceie Leel o ulic sector Corruptio • 20
"op-Fie" Lit Coutr
■ ere icouct • 21
■ eao or not eporti ere icouct • 22
■ Cael to eport ere icouct • 23
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ERCEIED EES F BIC SECR CRRIN
Corruption erceptions Index, 2010
igher levels of
corruption in most
Asian countries
necessitates greater
focus from companies
on compliance risk.
■ siapore ta out rom
oter ia coutrie a
i perceie a oe o te
leat corrupt coutrie
i te orl.
The 2010 Corruption Perceptions Index measures the perceived level of public sector corruption in 178 countries
around the world.
Source: “Corruption Perception Index,” Transparency International , http://transparency.org/policy_research/surveys_indices/cpi/2010/results, 2010.
0
10
MoreCorrupt
essCorrupt
Indonesia China nitedStates
India Malaysia nitedKingdom
Singapore
2.8
3.33.5
4.4
7.1
7.6
9.3
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21
-FIE BSERED MISCNDCS BY CNRY
ercentage of Respondents Who Report aving bserved a Specic ype of Misconduct
referential reatment,
Misuse of rganization’s
ime or Resources, and
Conict of Interest are
the most common types
of misconduct observed
in Asia.
China India Malaysia Singapore Indonesia Asia Average Global Average
1 Conict of
Interest (12%)
Preferential
Treatment
(10%)
Discrimination
(17%)
Preferential
Treatment
(10%)
Preferential
Treatment
(16%)
Conict of
Interest (9%)
Preferential
Treatment (11%)
2 Misuse of
rganization’s
Time or
Resources
(10%)
Conict of
Interest (8%)
Misuse of
rganization’s
Time or
Resources
(15%)
Misuse of
rganization’s
Time or
Resources (8%)
Conict of
Interest (16%)
Preferential
Treatment (8%)
Inappropriate
Behavior (9%)
3 Harassment
(8%)
Harassment
(7%)
Preferential
Treatment
(14%)
Conict of
Interest (8%)
Misuse of
rganization’s
Time or
Resources
(12%)
Misuse of
rganization’s
Time or
Resources (8%)
Misuse of
rganization’s
Time or
Resources (8%)
4 Inappropriate
Behavior (8%)
Inappropriate
Behavior (7%)
Harassment
(14%)
Inappropriate
Behavior (8%)
Harassment
(11%)
Harassment
(8%)
Harassment
(8%)
5 Stealing of
Company
Property (6%)
Misuse of
rganization’s
Time or
Resources (7%)
Conict of
Interest (13%)
Harassment
(8%)
Discrimination
(9%)
Inappropriate
Behavior (7%)
Conict of
Interest (6%)
Source: CEC RiskClarity Survey Data, 2009–2010.
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-FIE REASNS FR N RERING BSERED
MISCNDC
ercentage of Respondents Who Selected a Specic Reason for Not Reporting
Fear of retaliation is
the top reason for not
reporting observed
misconduct both globally
as well as in Asia.
China India Malaysia Singapore Indonesia Asia Average Global Average
1 Fear of
retaliation
(42%)
Fear of
retaliation (31%)
Fear of
retaliation
(38%)
Fear of
retaliation
(46%)
I did not think
I had enough
information
(33%).
Fear of
retaliation
(37%)
Fear of
retaliation
(49%)
2 I did not think
I had enough
information
(34%).
ther (22%) I did not think
I had enough
information
(23%).
I did not think
I had enough
information
(27%).
Fear of
retaliation
(25%)
I did not think
I had enough
information
(24%).
I did not think
the company
would do
anything about
it (20%).
3 I did not want
to get involved
(18%).
I did not think
I had enough
information
(15%).
I’ve heard
stories about
people raising
concerns before
and nothing
ever happened
(17%).
I did not think
the company
would do
anything about
it (21%).
I did not think
the company
would do
anything about
it (22%).
ther (20%) The person
who committed
the violation
was very senior
(17%).
4 ther (16%) The person
who committed
the violation
was very senior
(14%).
I did not think
the company
would do
anything about
it (17%).
ther (19%) I assumed
the company
already knew
about the
misconduct
(20%).
I did not think
the company
would do
anything about
it (15%).
I did not think
I had enough
information
(16%).
5 I did not think
the company
would do
anything about
it (13%).
I did not think
the company
would do
anything about
it (12%).
I did not want
to get involved
(15%).
I did not want
to get involved
(15%).
I did not want
anyone to
get red or
penalized (12%).
I did not want
to get involved
(13%).
ther (15%)
Source: CEC RiskClarity Survey Data, 2009–2010.
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23
-FIE CANNES FR RERING BSERED
MISCNDC
ercentage of Respondents Who Selected Specic Channels for Reporting (A Respondent Can Select
up to wo Channels)
op-ve channels for
reporting observed
misconduct in Asia are
very similar to those
used globally.
Source: CEC RiskClarity Survey Data, 2009–2010.
China India Malaysia Singapore Indonesia Asia Average Global Average
1 Supervisor/
Manager (55%)
Supervisor/
Manager (76%)
Supervisor/
Manager (67%)
Supervisor/
Manager (66%)
Supervisor/
Manager (72%)
Supervisor/
Manager (70%)
Supervisor/
Manager (72%)
2 HR Department
(25%)
A superior
other than the
direct manager
(23%)
HR Department
(39%)
HR Department
(25%)
HR Department
(30%)
HR Department
(23%)
HR Department
(25%)
3 A superior
other than the
direct manager
(14%)
HR Department
(20%)
A superior
other than the
direct manager
(21%)
A superior
other than the
direct manager
(19%)
A superior
other than the
direct manager
(19%)
A superior
other than the
direct manager
(20%)
A superior
other than the
direct manager
(21%)
4 Hotline (11%) Compliance
and Ethics
Department(7%)
Compliance
and Ethics
Department(6%)
Compliance
and Ethics
Department(10%)
Compliance
and Ethics
Department(13%)
Compliance
and Ethics
Department(8%)
Compliance
and Ethics
Department(5%)
5 Security
Department
(9%)
mbudsperson
(3%)
Hotline (5%) mbudsperson
(9%)
mbudsperson
(13%)
Hotline (5%) Hotline (4%)
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C IngIy CIC
Au rr ruAb®
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