Is it Ethical for an Employer to Monitor Social Networking by Employees?

I have previously blogged about increasing workplace pressure (13% of workers say it exists) and retaliation against workers (22%) who blow the whistle on wrongdoing. These results appear in the 2011 National Business Ethics Survey (NBES). In this blog I report the results of a survey by the Association of Certified Fraud Examiners (ACFE) about occupational fraud in the workplace. Occupational fraud is a growing problem and costs business a lot of money each year.

The ACFE report focuses on occupational fraud schemes in which an employee abuses the trust placed in him by an employer for personal gain. The ACFE defines occupational fraud as “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.” A summary of the findings follows.

• Survey participants estimated that the typical organization loses 5% of its revenues to fraud each year
• The median loss caused by the occupational fraud cases studied was $140,000
• The frauds reported lasted a median of 18 months before being detected
• Asset misappropriation schemes were the most common type of occupational fraud, comprising 87% of the reported cases
• Financial statement fraud schemes made up just 8% of the cases, but caused the greatest median loss at $1 million
• Occupational fraud is more likely to be detected by a tip than by any other method
• Corruption and billing schemes pose the greatest risks to organizations throughout the world
• The presence of anti-fraud controls is correlated with significant decreases in the cost and duration of occupational fraud schemes
• Perpetrators with higher levels of authority tend to cause much larger losses
• The longer a perpetrator has worked for an organization, the higher fraud losses tend to be
• In 81% of the cases, the fraudster displayed one or more behavioral red flags that are often associated with fraudulent activities
• Nearly half of the victim organizations do not recover any losses they suffer due to fraud.

One of the reasons occupational fraud is on the rise is a changing ethic in the U.S. whereby the organization is a faceless entity. The entity and its management are increasingly separated from the workers; the pay disparity between top managers and the average workers has grown to greater than 300 to 1. The organization does not care about me, so why should I care about it? Of course, apathy explains part of the growing occupational fraud. Another contributing factor is we see some managers getting away with fraud so why not us? For example, very few managers have been prosecuted for their roles in causing the 2008-2009 financial meltdown.

Last week I received a question from a reader who asked if I thought it was ethical for an organization to monitor personal use of social networking sites by employees while at work. I said I did because it is no different than calling in sick when you are not or cheating on an expense report. Social networkers who use the Internet (for personal reasons) on the employer’s time are being paid for work not done. In fact, the NBES survey indicates it is a growing problem. It was one of the top five most frequently observed types of misconduct reported in 2011 with 16% of employees violating company internet use policies.

Most of the active networkers who reported misconduct say they experienced retaliation as a result: 56 percent compared to just 18 percent of less active social networkers and non-networkers. The perceived misuse of company resources to vent one’s concerns about an employer may play into these results. The NBES survey also indicates that active social networkers show a higher tolerance for certain activities that could be considered questionable. For example, among active social networkers, half feel it is acceptable to keep copies of confidential work documents in case they need them in their next job compared to only 15 percent of their colleagues.

Employees have to turn off their cell phones and not access the Internet while at work. It is difficult today given that so many people can’t seem to put the phone down while driving. Sometimes I wonder whether some people are having a cell phone conversation, texting, updating their Facebook page, or otherwise accessing the Internet while at sleep. Who knows, in a year or two that may be possible.

My advice is to focus more attention on interpersonal relationships. Stop texting so much. Stop cell-phoning so much. Go see a friend or business associate in person; talk, get to know the person on a personal level.

We have become a de-personalized society. I believe that is one of the reasons no one came to the aid of Ki-Suck Han last week as he struggled to get off the tracks while an oncoming train in the NYC subway was heading toward certain death for Mr. Han.

Blog posted by Steven Mintz, aka Ethics Sage, on December 12, 2012