Ethics & Compliance Initiative Addresses Organizational Ethics
A recently released report on ethics and compliance which results from the National Business Ethics Survey points to culture, leadership and values-based ethics and compliance programs that make a big difference in increasing employee reporting of workplace misconduct free from retaliation. This study was created by the Ethics Research Center (ERC), the research arm of ECI, and made possible in part by support from KPMG LLP.
The research shows that in organizations with effective, values-based ethics and compliance programs, employee reporting of wrongdoing increases by 61 percent. These values-based program efforts also decrease retaliation by as much as 93 percent. The likelihood of retaliation against reporters is also lessened in instances where employees believe that individuals at all levels of the organization are held accountable if they violate company standards or the law.
Ethics codes are virtually worthless without a strong, ethical tone at the top backed up by a culture that supports ethical behavior, leadership by top management in ethics, and a compliance programs that support the effort. This is clear from the key findings from the report including:
- More than eight in 10 workers report misconduct in organizations with the most effective values-based programs, compared to one three in organizations where programs are weakest, or do not exist at all.
- Organizations with values-based programs cite that 97 percent of all misconduct observed is either reported or resolved directly among employees.
- In organizations with strong ethics cultures, 80 percent of employees report observed misconduct, compared to 55 percent in organizations with weak ethics cultures.
- Only 4 percent of reporters experience retaliation in organizations with the most effective programs, whereas 53 percent of reporters say they face retaliation in organizations without effective programs.
An important element of ethical culture is the tone at the top. Tone at the top refers to the ethical environment that is created in the workplace by the organization’s leadership. An ethical tone creates the basis for standards of behavior that become part of the code of ethics.
The tone set by managers influences how employees respond to ethical challenges and is enhanced by ethical leadership. When leaders are perceived as trustworthy, employee trust increases; leaders are seen as ethical and as honoring a higher level of duties. Employees identify with the organization’s values and the likely outcome is high individual ethics; high organization ethics; and a lack of dissonance.
If the tone set by management upholds ethics and integrity, employees will be more inclined to uphold those same values. However, if top management appears unconcerned about ethics and focuses solely on the bottom line, employees will be more prone to commit fraud, whether occupational (i.e., job-related), or participation in fraudulent financial reporting.
Ethical decisions in the workplace are made jointly, in work groups or other organizational settings. The strength of personal values, the opportunities to behave unethically, and the exposure to others who behave ethically or unethically influence decision making. An alignment between an individual’s own values and the values of the organization help create positive work environments and organizational outcomes.
Organizational ethical climate refers to the moral atmosphere of the work environment and the level of ethics practiced within a company. Leaders determine organizational climate and establish character and define norms. Character plays an important role in leadership. Leaders of good character have integrity, courage and compassion. They are careful and prudent. Their decisions and actions inspire employees to think and act in a way that enhances the well-being of the organization, its people, and society in general. Ralph Waldo Emerson, the American essayist, poet and philosopher, said: “Our chief want is someone who will inspire us to be what we know we could be.”
Blog posted by Dr. Steven Mintz, aka Ethics Sage, on July 30, 2015. Professor Mintz is on the faculty of the Orfalea College of Business at Cal Poly San Luis Obispo. He also blogs at: www.ethicssage.com.