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Sixty percent of the 2,172 workers surveyed in June 2012 by the Ethics Resource Center (ERC), a nonpartisan nonprofit organization, said they will report misconduct they observe to their supervisor first. About one in five (21 percent) will report to higher management and about one in 10 (11 percent) will call a hotline. Just 1 percent will go first to an outside agency.
The National Business Ethics Survey of Fortune 500 Employees: An Investigation into the State of Ethics at America’s Most Powerful Companies, released July 24, 2012, explores the ethics-related practices at U.S.-based companies with annual revenues of $5 billion or more.
The most common forms of misconduct at such firms, in order of prevalence, include:
Yet all offenses are not perceived as equal, according to the ERC report.
The three most reported forms of misconduct are bribes given to clients, delivering goods that are not up to specifications and bribes given to public officials, while the least reported forms of misconduct include inappropriate social networking, Internet abuse and conducting personal business on company time.
“To the extent that workers believe some types of misconduct are ‘not a big deal,’ the company faces greater exposure to legal liability and is at risk for a general breakdown in employee respect for other rules as well,” the report noted.
“The best way for companies to reduce their risk and avoid outside involvement in workplace issues is to respond effectively to employees’ initial complaints and fix any problems identified,” according to the report. However, 26 percent of employee respondents said that as far as they know, there was no investigation into their report of misconduct.
Doubt that the company will take action is by far the most common reason employees choose not to report what they’ve observed, according to ERC.
This is unfortunate, ERC noted, because most reports (71 percent) have merit. “If companies want to know about misconduct … they have to be diligent about responding to every report they receive,” the report continued.
Ethics Reporting Practices at Smaller Organizations
The ERC began fielding a biennial National Business Ethics Survey (NBES) in1994 to generate private sector benchmarks on ethics in the workplace. This study, focused on the Fortune 500, provides employers at smaller firms the opportunity to compare their practices. For example, the study found that 74 percent of employees at the Fortune 500 businesses reported misconduct when they saw it, compared to 65 percent on average for all businesses in the U.S.
“Strong ethics programs at the Fortune 500 companies are paying off in higher reporting rates,” said ERC President Patricia J. Harned in a news statement. “That’s important because reporting provides businesses with an opportunity to catch problems early and fix them before they become more pervasive.”
Previous ERC research has found that companies with strong ethics programs and ethical cultures report lower levels of misconduct and higher levels of reporting—two core measures of ethical performance.
The report noted that 60 percent of Fortune 500 firms and 41 percent of U.S. firms in general have a “comprehensive ethics program” which includes all six of the following elements:
Though senior leaders set the tone for any organization, supervisors have the greatest impact on employee conduct because of their daily interaction with employees, ERC noted. Thus, when supervisors are “strong ethical leaders,” the number of workers who witness misconduct falls from 90 percent (when supervisors are perceived to have a weak commitment to ethics) to 44 percent. Moreover, just 3 percent of employees who observe misconduct fail to report it when their supervisor is an ethical role model. By comparison, 40 percent of employees decline to report ethical lapses when they perceive their supervisor’s commitment to ethics to be low.
“Companies need to make it clear to employees that ethical conduct is critical to success and that standards should never be compromised, regardless of the possible business benefits,” the report noted.
Rebecca R. Hastings, SPHR, is an online editor/manager for SHRM.
Personality Influences Ethics of Leaders, SHRM Online Ethics & Sustainability Discipline, July 2012
How to Conduct an Ethics Audit, HR Magazine, April 2010
Ethics: The Fabric of Business DVD, SHRM Foundation Learning Module
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