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  Ethics & Employees

Ethics Resource Center
National Business Ethics Survey


How Employees Perceive Ethics at Work in the United States

The 2005 survey was done via telephone with 3,015 American workers in the contiguous 48 U.S. states.  Below are the key sections of the October 12, 2005 ERC press release on the 2005 survey (the previous survey was in 2003). For additional methodology related information, the full National Business Ethics Survey report is available at www.ethics.org.

More than half of American workers have observed at least one type of ethical misconduct in the workplace, a slight increase from 2003, despite an increase in worker’s awareness of formal ethics programs, according to the 2005 National Business Ethics Survey (NBES) released today by the Ethics Resource Center.  Employee reporting of misconduct they observe is also down by 10 percentage points. Despite the decrease in ethical conduct, according to the NBES report, “Ethics and compliance programs can and do make a difference.  However, their impact is related to the culture in which they are situated.” 

The survey of more than 3,000 American workers, analyzes trends in workplace ethics, the implementation of formal programs, the ethical culture within organizations, the impact of programs, and factors that pose risks of misconduct.

Some of the key findings include:

  1. 52% of employees observed at least one type of misconduct in the workplace in the past year, with 36% of these observing at least 2 or more violations.
  2. 69% of employees report their organizations implement ethics training, up 14 percentage points from the 2003 NBES.
  3. 65% of employees indicated their organizations have a place they can seek ethics advice.
  4. 55% of employees who observed misconduct at work reported it to management, down 10 percentage points from the 2003 NBES.
  5. Five of six elements of a formal ethics and compliance program measured by NBES have increased over time with the presence of written standards of ethical business conduct up 19 percentage points since 2004.

“Regulation resulting from Enron and other corporate scandals spurred a renewed emphasis on corporate ethics and new laws and regulations related to compliance,” said Dr. Patricia Harned, president of the Ethics Resource Center.  “Since that time organizations, especially for-profit companies, have invested significant resources in ethics and compliance programs, but we are not seeing much change in the direct impact that these programs are having.  Organizations need to evaluate what will work most effectively, including a closer look at the role workplace culture plays.”

Misconduct
 
The NBES defines misconduct as any behavior that violates the law or organizational ethics standards.  The two most common types of misconduct observed by employees are abusive or intimidating behavior towards employees and lying to employees, customers, vendors, or the public.

Types of misconduct most observed by employees include:

  1. 21% observed abusive or intimidating behavior towards employees.
  2. 19% observed lying to employees, customers, vendors, or the public.
  3. 18% observed a situation that places employee interests over organizational interests. 
  4. 16% observed violations of safety regulations. 
  5. 16% observed misreporting of actual time worked. 
  6. 12% observed discrimination on the basis of race, color, gender, age or similar categories.
  7. 11% observed stealing or theft.
  8. 9% observed sexual harassment.

 
Of those employees who observed misconduct, 52 percent indicated the conduct violated their organizations standards only, 4 percent indicated it violated the law only, and 44 percent indicated both the law and organization standards. 

Levels of observed misconduct were distributed evenly throughout different sectors with 29 percent of employees in government agencies observing some type of misconduct followed by 26 percent of non-profit organizations, and 25 percent within publicly traded and privately held for-profit companies.

The smallest organizations, those with under 25 employees, were the least likely to have some employees who observed some type of misconduct with 16 percent.  Organizations of other sizes all had higher, similar rates of observing misconduct, and ranged from a high of 31 percent for organizations with 500-1999 employees, to a low of 27 percent for organizations with 25-99 employees and 2,000-9,999 employees.

Rise in Formal Programs

Five of six elements of a formal ethics and compliance program measured by NBES have increased over the 2003 NBES and consistently since the first NBES survey in 1994.  The six elements  are based upon suggestion by the Federal Sentencing Guidelines for Organizations regarding an effective ethics and compliance program, and include:

  1. Written standards of conduct
  2. Training on ethics
  3. Mechanisms to seek ethics advice or information
  4. Means to report misconduct anonymously
  5. Discipline of employees who violate ethical standards
  6. Evaluation of employees performance based on ethical conduct

Nearly nine-in-ten employees, 88 percent, indicated their supervisors disciplined employees who violated ethical standards.  This was followed by 86 percent of employees who indicated their organizations had written standards of conduct, 73 percent who indicated there are means to report misconduct anonymously, and 69 percent who indicated there was training on ethics and mechanisms to seek advice.  The only element to decrease since the 2003 NBES was the percentage of employees who said their supervisors evaluate ethical conduct as part of their performance, down to 67 percent from 74 percent in 2003.

“Top corporate leaders must make ethics a very high and serious priority, not only within their own organizations but throughout the business world,” said Ira A. Lipman, Chairman and President of Guardsmark, LLC, Principal Sponsor of both the 2005 and 2003 surveys.  “The leadership of corporate America should see ethics as one of their top responsibilities, and as an integral part of their stewardship and service to shareholders and customers." 

"Senior executives should implement strong ethics programs within their companies," said Lipman, who has made ethics a central focus within his company for a quarter of a century.  "But, equally important, they must build the type of ethical culture that will really make a difference.  Ethics is not one employee in one department publishing a code of ethics.  It is a responsibility given to every employee in the company, but it must be led by top leadership.  An ethical culture is one where actions from the top down are met from the bottom up in an all-encompassing process.  Ethics then lives and breathes and moves with the organization itself.”

Ethical Culture

One critical finding of the 2005 NBES is the importance of an ethical culture in organizations, the informal and social system that sets norms for the employee behavior that tells employees how things really work in that organization.  The NBES measures elements of an ethical culture such as the ethics-related actions of employees at all levels, and perceptions of accountability for ethics violations.

Employees in organizations with a weak ethical culture reported a much higher level of observing at least one type of misconduct than employees in an organization with a strong ethical culture (70 percent compared to 34 percent).  Those employees in organizations with a strong ethical culture were more likely to report the misconduct than those in weak-culture organizations (79 percent compared to 48 percent).

Culture had a stronger impact on the results or outcomes reported by employees than did formal ethics and compliance programs. In 2004, the U.S. Sentencing Commission recognized the importance of a strong ethical culture for organizational compliance.  Their guidelines stated the establishment of an ethical culture was one essential area of focus for an organization’s program dealing with ethics and compliance.

“Creating a strong ethical environment should be a top priority of all companies,” said Harned.  “We know formal programs are critical and work well initially, but we must now focus greater attention on building the right culture in which programs operate.  This data shows, for example, that management needs to lead by example to set the right tone throughout the whole organization.”

Risk

Recently, the U.S. Sentencing Commission also highlighted the identification and reduction of risk to the areas of ethics and compliance for organizations.  Companies must now regularly assess the risk of criminal conduct within their organization if their ethics and compliance programs are deemed effective by the Commission.   

For the first time in 2005, the NBES examined the potential for employees to encounter situations that are likely to result in misconduct.  The NBES defines risk factors as:

  1. Employee’s exposure to circumstances that invite misconduct.
  2. Employee’s recognition of those situations as misconduct.
  3. Pressure to compromise the standards of the organization.
  4. Preparedness of employees to respond to these situations.

Also see our page on NBES on Whistleblowing

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