MAC: Mines and Communities

Mining companies don't seem bothered by being corrupt

Published by MAC on 2012-05-29

According to a new survey by the accountancy firm, Ernst & Young, over half the companies they contacted in India are willing to provide "entertainment" to win business.

Sixty percent of Indonesian firms are also ready to make cash payments in order to win or retain contracts.

And an alarming 28% of Indonesian chief financial officers interviewed considered there was nothing wrong in mis-stating their company's financial performance.

E&Y singled out mining, defense, oil and gas, companies when making their appraisal.

See also: Oxfam America files lawsuit against Securities and Exchange Commission

More businesses not bothered by being corrupt: E&Y study

By Michael Allan McCrae

23 May 2012

Fifteen percent of chief financial officers are willing to make a cash payment to win business up from 9% when surveyed a year ago, according to a recent report by Ernst & Young.

Ernst & Young table on corruption
Ernst & Young table on corruption

The 12th Global Fraud Survey found an overall uptick in bribery and corruption. The report authors speculate that the economic uncertainty may contribute to the slide in ethics.

The study was compiled from 1,700 interviews in 43 countries that started in Nov. 2011 and wrapped up in Feb. 2012.

Around 5% of respondents thought it was OK to misstate financial performance compared to 3% in the last survey.

On a global basis, 39% of respondents reported that bribery or corrupt practices occur frequently in their countries.

Developing countries face high levels of corruption:

The E&Y study singled out miners where offset obligations could be a concern:

Foreign companies are often obliged to make investments in local projects as a condition of being awarded a contract. These offset obligations are particularly common in defense, oil, gas or mining contracts with African states. Offset obligations almost always involve negotiations with government officials and, since the sums involved are often large, they can be used as a covert way of paying bribes.

Regulators are increasingly focusing on these transactions. Additionally, the US Dodd-Frank Act imposed new disclosure requirements on US-listed companies and other jurisdictions, like the EU and UK, are considering similar measures.

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