DAILY NEWS Jul 5, 2006 5:15 PM - 0 comments

Study finds corporate misconduct remains the same, despite SOX

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A KPMG study of U.S. corporate behavior in the wake of strong corporate governance legislation like Sarbanes-Oxley will likely have many risk managers and D&O insurers shaking their heads
According to the KPMG Integrity Survey 2005-06, 74% of the more than 4,000 U.S. employees surveyed reported they had observed misconduct in the prior 12-month period.
Half of the respondents reported that what they had observed included serious misconduct that could cause "a significant loss of public trust if discovered."
The results are based on responses from 4,056 U.S. employees, spanning all levels of job responsibility, 16 job functions, 11 industry sectors, and four thresholds of organizational size.
Between 2000 and 2005, employees reported "consistent levels of overall misconduct, with 74% reporting in 2005 that they had observed misconduct, compared with 76% in 2000."
However, KPMG reported, "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."
For example, 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 CEOs 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.
The KPMG study also found that "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."

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