Leading From
the Top

Why Board Members Must Walk the Talk on Integrity

by Jim McCurry

Insights from the EY Global Integrity Report 2024

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by Jim McCurry, EY Global Forensic & Integrity Services Deputy Leader
Insights from the EY Global Integrity Report 2024

In today’s world, integrity isn’t just a virtue. It’s the foundation that helps businesses build trust with their employees, customers, suppliers, and investors, making it essential for any business looking to compete on the global stage.

The current volatile economic climate has made it increasingly challenging for even the most established and successful businesses to maintain standards of integrity. This reality is laid bare in the EY Global Integrity Report 2024 in which half of the respondents admit their organizations struggle to uphold integrity in difficult market conditions.

The report surveyed employees and board members across 53 countries and territories, and it looked at how they view integrity. It underlines why leading by example is critical and why an ‘integrity first’ culture is the only way forward.

If integrity standards are to hold steady across the business world, let alone rise, business leaders need to step up to the plate. That means not only communicating the importance of integrity, but also putting it into practice through action.

Jim McCurry, EY

Challenges are increasing but standards have improved

The businesses surveyed highlighted several external threats to integrity, including cybercrime (26%), health-related crises (22%), financial performance expectations (22%), supply chain disruptions (21%) and geopolitical issues (15%).

They also identified a host of internal factors, including high employee turnover (26%), a lack of resources (25%), pressure from management (24%), and failure of financial processes or controls (20%).

Drivers of success

Despite these persistent internal and external pressures, the key findings of the study are positive: almost half of respondents (49%) say their organizations’ integrity standards have improved over the past two years. That’s an increase of 7% since the previous report published in 2022.

It’s also clear that respondents report a more positive view of their own personal integrity, compared to standards within their own organizations. The majority (90%) are confident that they and their colleagues abide by relevant laws, codes of conduct, and industry regulations, but only a third (32%) are very confident that their organization has the processes in place to prevent, detect, and respond to significant integrity issues.

Respondents say that the improvements are the result, at least in part, of increased direction from management – a sign that communications from the top are working to some extent. However, stricter regulation and demand from customers also play a clear role.

For organizations around the world, building a culture of integrity through effective communication from management, policies, and programs is even more crucial as external challenges become more pronounced and complex.

However, there is undoubtedly a long way to go. Meaningful progress will require business leaders to take a much more proactive approach. Alarmingly, only a fifth (22%) of respondents to our survey say that their management speaks to them frequently about the importance of integrity – a decline from 32% in our last report.

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The ‘say-do’ gap is growing

A concerning finding from our research is that even where leaders are speaking about integrity, employees tend to see it as paying ‘lip service.' Almost half of the people we surveyed (49%) said that managers don’t back up their words with action. This erodes trust both internally and externally, putting organizations at greater risk.

There’s also a sense among employees that some levels of an organization can get away with misconduct more easily than others. Almost a third of respondents say that unethical behavior is likely to be tolerated when those involved are senior employees or high performers.

There are also concerns when it comes to reporting misconduct – 16% of employees and 52% of board members have reported misconduct in the last two years. However, of those who reported, 50% of employees and 65% of board members felt pressure not to do so.

It's hard to understate the importance of having a healthy culture where people feel free to speak up, but for that to happen, people at all levels need to know that their concerns will be listened to and acted upon and that they can air their concerns without any fears of repercussions.

Reported misconduct:
_{(in the last two years)}

16%

of employees

52%

of board members

Board members need to walk the talk

We know that in more challenging times, operating with integrity can become more of a struggle for some organizations - but it is precisely in these times that leaders need an acute focus on communicating the value of integrity and putting it into action.

The survey shows that one in five organizations have experienced an integrity incident – ranging from fraud and data privacy violations to regulatory compliance breaches – and this underscores the importance of leadership by example. Nearly half of the respondents (45%) attributed these incidents to a lack of appropriate tone from senior management or pressure not to report violations. Business leaders must take a strong stance on integrity and make it a central pillar of their communications strategy.

The key to achieving your integrity agenda

People are an organization's greatest asset, and any organization aiming to prioritize integrity needs to put people at the center of its compliance programs.

In practice, this can involve creating an effective ‘speak-up’ culture or improving communications and feedback from the top-down, but what matters is that organizations create multiple touchpoints with employees and senior leaders. Here are some principles that can act as a starting point:

Lead from the top

Integrity can’t be built by words alone. Senior leaders must show they mean what they say if they are to prevent and address misconduct. Establishing successful mechanisms for reporting and investigating incidents will only work if leaders are seen to support and follow them.

The more employees see leaders standing up for them and taking concrete action following reports of misconduct, the more comfortable they will feel about reporting wrongdoing when they see it.

Design and implement a structure to execute strategy

To build a successful strategy, organizations must establish sound governance structures that:

Align with the organization’s defined roles and responsibilities
Establish clear accountability through key performance and behavioral indicators
Breakdown silos to allow for the free flow of information to those who need it
Build trust through transparency
Identify the root cause of wrongdoing by addressing systemic challenges

Strengthen a culture of integrity across the organization

Organizations need to recognize that integrity is a team effort. Compliance is not a standalone support function, and operating with integrity should be built into every team across the organization.

It’s important that employees view their peers as holding high standards of integrity; however, they must also see these standards reflected in leadership. To create an effective ‘speak-up’ culture, leaders must set an example while rewarding employees for acting with integrity rather than focusing solely on punishing others for misconduct.

Boost awareness, training and communication

Better awareness, training and communication, stronger compliance-related procedures, and improvements to governance and leadership need to be at the top of the agenda to address integrity risks. Integrity standards and policies are more likely to be followed when employees understand why they are important.

In challenging times, leaders must drive the integrity agenda

In an era of rapid change and persistent macroeconomic and geopolitical uncertainty, integrity standards can suffer. What’s clear is that the biggest hurdle to improving standards is often organizational culture. While it might be more convenient to blame external factors, and while they do of course play a role, the key to boosting integrity standards starts from within. ■

To learn more, click here to read the full version of EY's 2024 Global Integrity Report.

Jim McCurry is EY Global Forensic & Integrity Services Deputy Leader. Jim joined EY in 1996, and currently serves as the Deputy Global Leader for the Forensics practice. Prior to this, Jim was the Global Sector Leader of the Forensics practice and has also served as the EMEIA leader. He has over 26 years of experience performing forensic investigations and related assignments.