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KPMG's 2005-2006 Integrity Survey

Between 2000 and 2005 the U.S. experienced a wave of corporate scandals followed by the passage of a wide variety of new regulations. KPMG Forensic’s 2005-2006 Integrity Survey, based on the perceptions of over 4,000 employees in U.S. companies, seeks to guage what effects these reforms have had on corporate misconduct.

The survey is divided into five sections with graphs explaining the details of its findings:

  1. Overall Results (the prevalence, nature, prevention, and detection of misconduct; corporate response to misconduct; and the perceived corporate
  2. Comparison of 2000 and 2005 Data

  3. Impact of Ethics and Compliance Programs (with roughly the same categories as Section 1)
  1. Meeting the Regulatory Challenge (explanations of reforms that have taken place between 2000 and 2005: Sarbanes-Oxley of 2002; new corporate governance listing standards in the New York Stock Exchange (NYSE) and National Association of Securities Dealers Automated Quotation (NASDAQ) system; new federal sentencing guidelines that require the establishment of corporate codes and ethics programs for certain organizational defendants, amendments to the Department of Justice’s prosecution policy for organizational defendants; and court rulings that increase director and officer liability for their employees’ misconduct.

  2. Background and Methodology of the Survey (the results of the survey are based on responses from 4,056 U.S. employees, spanning all levels of job responsibility, 16 job functions, 11 industry sectors, and 4 thresholds of organizational size)

Executive Summary of KPMG’s 2005-2006 Integrity Survey:

Nearly three out of four employees reported that they had observed misconduct in the prior 12-month period, with half of employees reporting that what they had observed was serious misconduct that could cause “a significant loss of public trust if discovered.”

Between 2000 and 2005, employees reported:

- Consistent levels of overall misconduct, with 74 percent reporting in 2005 that they had observed misconduct, compared with 76 percent in 2000

-Consistent levels of serious misconduct, with 50 percent in 2005 characterizing the misconduct they had observed as serious, compared with 49 percent in 2000

Although the level of observed misconduct has remained constant, employees reported that the conditions that facilitate management’s ability to prevent, detect, and respond to fraud and misconduct within companies are improving.

Between 2000 and 2005, employees reported the following positive changes in conditions and attitudes:

- Pressure to engage in misconduct to meet business objectives has decreased.

- The adequacy of resources available to meet targets without cutting corners has improved.

- Apathy and indifference toward codes of conduct have declined.

-Comfort levels in using a hotline to report misconduct have risen.

-Confidence that appropriate action would be taken in response to alleged improprieties has increased.
- Confidence that whistleblowers would be protected from retaliation has increased.

- Perceptions of chief executive officers and other senior executives as positive role models have improved.

- The perception that top management is approachable if employees have questions about ethics or need to deliver bad news has increased.

-The perception that business leaders would respond appropriately if they became aware of misconduct has increased.

Employees who work in companies with comprehensive ethics and compliance programs reported more favorable results across the board than did those who work in companies without such programs. For instance, employees who work in companies with such programs reported fewer observations of misconduct and higher levels of confidence in management’s commitment to integrity.

At companies with ethics and compliance programs:

- Employees reported fewer observations of misconduct.

- A significantly higher percentage of employees reported that their colleagues felt motivated and empowered to “do the right thing.”

- A significantly higher percentage of employees reported that their colleagues felt comfortable raising and addressing ethics concerns.

- A significantly higher percentage of employees believed their CEOs and other senior executives valued ethics and integrity over short-term business goals.

For the full survey please see KPMG’s website here.

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Critical Issues Highlighted In Czech Business Attitudes to Ethics

By Adriana Krnáčová          
Executive Director, Transparency International Czech Republic http://www.transparency.cz/

The concept of “business ethics” is a vague one for many Czech companies.  In part this may be due to the fact that the Czech Republic, like many other Central and Easter European countries, lacks a long history of private sector regulation and shareholder activism.  Clearly, approaches to business ethics in this country differ significantly from those widely found in leading Western economies. This discrepancy poses challenges to both to Czech citizens concerned with enhancing domestic business ethic, as well as to current and potential Western investors.

Transparency International – Czech Republic released a report in December 2005 on a survey it conducted to determine the attitude of the business community towards adherence to ethical principles.

Surveying 254 representatives of middle management of Czech Companies, the report seeks to answer, among others, the following questions:

  1. is the current economic, cultural, and regulatory environment favorable or detrimental to business and in what ways;
  2. in which sectors is corruption the most prevalent and why?
  3. how do Czech businessmen see the costs and benefits of bribery and is it perceived to hurt business in the long-run.

The surveys results illustrate some critical issues for anti-corruption initiatives in former Soviet-bloc countries, many of which possess customs, laws and political and cultural climates inimical to traditionally Western notions of business ethics.
The survey found that, for the most part, Czech companies define “business ethics” in a significantly more limited way than do Western countries. They tend to regard ethics as relating more to business customs, contracts and payments rather than to the avoidance of bribes or patrimony. Those surveyed differentiated between “good” and “bad” corruption, determined by whom it affects – an unethical practice that hurts the company is viewed as censurable, while one that increases its profits is generally tolerated, at times, even encouraged.

The report found that while many businessmen concede that unethical practices may damage the reputation of a company, most believed that this lost reputation will not affect the welfare of the company in the short or long run. In fact, 4 out of 5 of the interviewees accepted that corruption in business represents a competitive advantage. The report attributed several factors to this outlook including ambiguous, overly complex and weakly enforced business legislation, preferential treatment of foreign companies, corrupt public procurement procedures, and a high tax burden.

For many businesses, which are struggling to survive in a shaky and relatively new business environment, a corruption-free attitude is seen as secondary matter compared to ensuring the very existence of their companies.  Concepts of ethical responsibilities are seen as more a matter for the individual, than for the company.

According to the survey, the public sector, particularly the public procurement process, is seen to be significantly more corrupt than the private sector for several reasons. It is said to be non-transparent, with ample opportunities for fraud. Then, public sector agencies are not seen as being subject to the same effective rules as private sector companies – they do not have to make a profit, their future is not endangered by their business management, they do not run the risk of insolvency and their budgets are fixed. In sum, public officials have little incentive to manage funds in a responsible and transparent manner.  Those surveyed suggested that, as a result, the winner of public tender is often decided on, usually from a pool of personal contacts, before the formal bid process commences.         

The aim of the survey was to find out what is the attitude of the business community towards the adherence to ethical principles. The first part of the survey was carried out by both CATI (Computer Assisted Telephone Interviewing) and CAWI (Computer Assisted Web Interviewing) methods, using an identical structured questionnaire. The sample comprised 254 representatives of middle management of Czech companies and 39 representatives of middle management of British companies with an annual turnover of more than CZK 100 mil. (incl.). The second – qualitative - part of the survey was carried out by means of individual in-depth interviews with 50 top managers of companies with an annual turnover of more than CZK 100 mil. (incl.). The survey was carried out for TIC by GfK Praha.

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U.S. Business Views of Critical Ethics Issues

An important survey of corporate attitudes to ethics has been published by the Center for Corporate Citizenship at Boston College , supported by the U.S. Chamber of Commerce. Survey results include:


Executives fall into two camps regarding business’ role in society. Slightly more than six in 10 perceive business as balancing the interests of multiple stakeholders, including investors, employees, consumers, communities, and the environment. The remaining respondents take a more compliant perspective focused on fulfilling employee and shareholder obligations. And while all companies engage in similar corporate citizenship activities, large companies are far more likely to have an expansive definition of their role in society. Among large companies:

  • 64% indicate that corporate citizenship is part of their business strategy (44% overall)
  • 68% have increased investment in corporate citizenship over the past two years (29% overall)


Engagement is largely driven by internal considerations – seventy-three percent of companies cite their company’s traditions and values as the primary actuating factors – and few respondents name employees (16%), top management (10%), or middle management (8%) as hindrances in their corporate citizenship efforts. Despite this internal recognition of corporate citizenship importance, 54% of executives report that a lack of resources is their biggest barrier. And while executives clearly view their role as societal stewards as important, the findings suggest a modest gap between executives’ expressed attitudes and the actions companies are actually undertaking.



The findings do reveal that, across the board, companies are actively engaged in public life. Private sector involvement in social issues includes environmental protection, supporting education, and economic development in our poorest communities. The means by which each company relates to society is unique, and there is no one universal corporate citizenship strategy.  Details at The State of Corporate Citizenship in the U.S.: Business Perspectives in 2005.

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International Business Ethics Review
Spring/Summer 2005, published by the International Business Ethics Institute

The Review contains an article by former Lockheed and World Bank ethics executive Anita B. Baker on international developments in evolving common ethics standards. The article examines a range of codes and initiatives. Dr. Baker notes that an increasing number of companies are developing their own codes of conduct by drawing from “over 100 sets of international standards and guidelines.” Convergence in a number of areas appears to be evolving, and an increasing number of academics are researching this fertile area.

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