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Walk the Walk: Preventing Workplace Fraud Starts at the Top

Leaders who focus on transparency gain the trust, respect and loyalty of their people.

Posted by Joe Gerard on May 9th, 2011

When it comes to workplace fraud prevention, actions sometimes speak louder than words. This is one of the key messages that forensic accountant and fraud investigator Tracy Coenen wants people to get when they are looking at ways to reduce fraud in their organizations.

When we interviewed Coenen on the subject of preventing workplace fraud, she stressed the importance of developing a culture of integrity in which employees know what’s acceptable and what isn’t, and ensuring that the actions of management reflect this culture.

She cites an example of an organization in which everyone knows the sales manager cheats on his expense report. “That tells people it’s ok to cheat as long as you don’t cross some imaginary line,” she says. “So it’s not only leading by example but also having that very well designed line between what’s ok and not ok, that we never even want to get close to because we don’t want our employees substituting their judgment for ours.”

It all boils down to getting management to lead by example. It’s easy to say, but more difficult in practice.

Start at the top

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“The overused phrase is ‘tone at the top’ but it’s really true. What we want to do is have an organization that has very transparent rules that everyone follows transparently,” says Coenen.

It starts with the board of directors. “They can’t just be this group of people we never see, that we know meets once a month or once a quarter. They need to have a face and be a real person to our employees,” she says.

One way to achieve this is through the involvement of board members in employee training exercises. Ideally this includes ethics training. It gives the employees a real person to identify with and it shows them that these issues are important to the people at the highest levels of the company.

Talk the talk

A company code of ethics and code of conduct are also critical elements of fraud prevention, particularly in light of anti-corruption legislation such as the US FCPA and Canada’s Corruption of Foreign Public Officials Act. Not only does a code of conduct instruct employees, but it also helps protect the company and management.

Coenen advocates involving employees in the creation of the code of conduct. “They’re the ones who know what the risks are,” she says. Asking employees about some of the problems that occur with customers, suppliers and co-workers can provide real insight into the issues that need to be addressed in the code of conduct and in training.

With overall responsibility for the company, the board of directors should also be involved in creating the code of conduct. In addition to approving it, they should also have input. This is another area where the board of directors can participate in the company’s operations, showing themselves as human and accessible, while reinforcing the importance of ethics for the company

Happiness breeds loyalty

The recent uprisings in the Middle East have shown that unhappy people cause trouble and that leaders who focus on transparency gain the trust, respect and loyalty of their people.

“When employees are happy at their jobs, they work better and they’re less likely to steal,” says Coenen. “In terms of fraud, that’s probably the number one thing. You don’t want people to have any negative feelings toward the company and to act on those negative feelings.”

As Coenen outlines in her book, Essentials of Corporate Fraud, “The fact that fraud is easy to commit is no excuse for employees to scam their employers. But executives and managers must become aware of the potential for fraud and must acknowledge the risk of fraud and the ease with which it may be committed.”

Joe Gerard
Joe Gerard

CEO, i-Sight

Spend my days showing off the i-Sight investigative case management software and finding ways to help clients improve their investigations. Usually working with corporate security, HR & employee relations, compliance and legal teams.

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