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Fraud study: Canadian execs mostly ethical… um, yeah, sure, kind of…

36 percent of execs can justify at least one sort of unethical behavior



Canadian execs don’t tend to slip a few C-notes to clients and say it’s ethical. They’re also not likely to justify backdating contracts to make their financial statements look better. But in a recent EY fraud survey, “they were more open to areas that had more judgment involved,” says Mike Savage, partner and leader of the fraud investigation and dispute services practice at EY. “And that would be areas such as changing assumptions to determine valuations or reserves or more flexible product return policies.”

Globally, however, 36 percent of execs can justify at least one sort of unethical behavior, which Savage attributes to the perfect combination of motive, opportunity and rationalization.

Some white collar fraudsters tell themselves their mathematical manipulation is for the greater good: “‘If I just keep the numbers looking good for this quarter, they won’t close the operation down, it will get better next quarter, and I’ve saved all these people from unemployment.’”

Others are a little more selfish and fudge the numbers because they worked really hard this year and it’s not fair their colleagues’ mistakes will cost them their bonus.

To tackle this kind of internal fraud, Savage suggests businesses focus on that rationalization aspect. After all, it’s hard to axe incentive compensation outright. And if a company has so many controls it’s impossible for anyone to do anything wrong, productivity would stagnate and profits would tumble—though it’s worth putting more resources into protecting cash than real estate. So corporate policy should be very clear about what is and isn’t acceptable, and training should make sure all employees understand what’s expected.

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Copyright © 2016 Transcontinental Media G.P. This article first appeared in the May 2016 edition of Canadian Insurance Top Broker magazine

Copyright © 2017 Transcontinental Media G.P.
Transcontinental Media G.P.