Survey reveals poor ethics and compliance adherence

Companies are failing to implement safeguards to prevent ethics and compliance failures.

Only 56 per cent of general counsel claimed to have the necessary policies in place to counter ethics and compliance risks, according to the European corporate compliance survey carried out by the Association of Corporate Counsel and Integrity Interactive.

Paul Basson, president of Integrity Interactive Europe, said: “Despite high-profile cases such as Parmalat, our research shows that many European companies will not have the resources to take the necessary protection to protect against a corporate meltdown.”

The Parmalat scandal of 2004, in which its founder Calisto Tanzi secretly siphoned up to €500m (£336.59m) from the Italian company to a family-owned subsidiary, is an example of what could happen if the risks continue to be ignored.

West Bromwich Building Society legal counsel Simon Welch countered: “A strong corporate governance culture leads to companies investing in ethics and compliance.”

The survey also found that although 99 per cent of companies have codes of conduct or statements of values and principles, only 50 per cent ensured all employees were aware of the information contained in them.

In addition, 19 per cent of companies chose selected employees to view codes of conduct, even though most believed that all employees should be privy to it.

But Basson said it was “not good enough to have codes of practices buried on an intranet site where employees have to proactively seek them out”.

Fewer than one in 10 of the respondents expect budgets for compliance projects to increase significantly.

More than half believe that conflicts with other business priorities are preventing companies from investing more time in tackling compliance and ethics issues.

Basson said implementing additional initiatives to attract suitable compliance lawyers and increasing the budget were key to implementing effective ethics and compliance programmes.

Peter Kennerley, Scottish & Newcastle general counsel and company secretary, said: “All these issues are about what makes business sense, because if you’re not being honest with your customers, then you’re not going to win business.”