Ethics Resource Center
National Ethics Surveys

2007 NATIONAL NONPROFIT ETHICS SURVEY

Nonprofit Organizations’ Ethical Reputation Shows Signs of Erosion

Levels of misconduct still lower than in business and government

For the first time, the Ethics Resource Center (ERC) has issued a survey on the status of ethics in nonprofit organizations, completely separate from its previous two reports on businesses and government.  Since 1994, ERC has issued these surveys to serve as benchmarks for each sector, and the organization has included data from the nonprofit sector since 2000.  The separate report provides a useful comparative look at how ethical conduct in nonprofits stands up to the other two sectors.  The latest report provides in-depth analysis and data to support the claim that despite a history of having a better ethical reputation, nonprofit organizations exhibit the same problems on a similar level to the private and public sectors.  

Ethical misconduct on the rise

Overall, nonprofits still show evidence of having stronger ethical cultures and a greater alignment of employees’ personal values with the missions and values of their organizations when compared to the public and private sectors, but not by much.  According to ERC research, 11 percent of nonprofit organizations have strong ethical cultures and one-third have well-implemented ethics programs – both fundamental factors ERC believes contribute to an ethical workplace.  However, the survey also says that the percentage of employees who observe misconduct is on the rise and that number of ethical violations in 2007 is comparable to numbers in both business and government.  In addition, ERC found that employees in nonprofits are the least confident about the future of ethics in their organizations. 

Financial fraud observed most often in nonprofits, other violations have sharply increased

The survey shows a significant increase in a number of ethical violations since 2005.  Putting one’s own interest before the interests of the organization rose significantly with 18% of employees reporting in 2005 and 24% reporting in 2007.  The number of people who observed alterations of financial records rose from five percent in 2005 to eight percent tin 2007.  Finally, those observing Internet abuse rose from 14% in 2005 to 18% in 2007.  The number of employees who observe financial fraud in their organizations is the highest out of all the sectors surveyed. 

On average nonprofits face severe risk from a handful of behaviors:

Conflicts of interest;
Lying to employees;
Misreporting hours worked;
Abusive behavior; and
Internet abuse.

An additional six types of misconduct pose high risk to the nonprofit sector:

Safety violations;
Lying to stakeholders;
Improper hiring;
Discrimination;
Sexual harassment; and
Misuse of confidential organizational information.    

A problem of governance

ERC attributes this rise in misconduct to the inability of governance standards to keep pace with the growing size of nonprofit organizations.  The problems that ERC observed in this sector is mainly due to poor governance, ERC states.  The board of directors tend to be more influential in nonprofit organizations than anywhere else, but at the same time, boards are not setting ethical standards for the organization.  Interestingly, ERC observed that in organizations where the board is viewed as top management or setting the tone, there was a higher level of misconduct observed. 

Ethics programs show near-perfect results

Despite some of these negative findings, ERC also found that in nonprofit organizations, if well-implemented ethics programs are in place, misconduct is virtually eliminated.  Those employees who report instances of ethical misconduct are also less likely to experience retaliation.  Overall, ERC states that feelings of fear or futility when reporting misconduct in decreasing in this sector.  

Based on this data, ERC especially encourages nonprofit organizations to implement a strong ethics program and set a strong ethical culture that emanates from the top.  The components that ERC believes are most essential to a strong approach to organizational ethics are:

• Ethical leadership: tone at the top and belief that leaders can be trusted to do the right thing.
  
  
• Supervisor reinforcement: individuals directly above the employee in the organization’s hierarchy set a good example and encourage ethical behavior.
  
  
• Peer commitment to ethics: ethical actions of peers support employees who “do the right thing.”
  
  
• Embedded ethical values: values promoted through informal communications channels are complementary and consistent with an organization’s official values. 
  
  

To download the full report, please visit the Ethics Resource Center website.

Posted 3/28/08

2007 NATIONAL GOVERNMENT ETHICS SURVEY

National Government Ethics Survey Shows Employee Misconduct is High

On all levels of government, there is a lack of programs and incentives to encourage ethical behavior, the report says

In the follow-up to the 2007 National Business Ethics Survey, the Ethics Resource Center (ERC) has just released the National Government Ethics Survey.  This is the fourth in a series of reports which surveys US government employees about their workplace environment.  Overall, the findings are sobering.  According to the report, the number of employees who have observed misconduct is on the rise, and the strength of ethical cultures in the workplace is declining.  One-third of employees still do not report incidents of misconduct, so management is largely unaware.  ERC states these statistics suggest that public trust is at risk.

Key Findings

• Six in 10 government employees saw at least one form of misconduct in the last 12 months.
  
  
• One in 4 employees work in an environment conducive to misconduct.  According to ERC, this includes strong pressure to compromise standards, a presence of situations which invite wrongdoing, and a culture where employees’ personal values conflict with their values at work.
  
  
• Overall strength of ethical cultures is declining.
  
  
• Almost one-third of employees do not report misconduct.
  
  
• More than one-third of government employees believe government does not demonstrate its values through socially responsible decision-making.
  
  

Levels of Government

Federal Level – The number of incidences of misconduct observed is slightly lower, but reporting is still comparatively low.  Only 30 percent of federal government organizations have ethics and compliance programs, and only 10 percent have strong ethical cultures.

State Level – Workers are most vulnerable to ethical risks as there are more reports of employees who have observed misconduct multiple times.  Still 30 percent do not report misconduct to management.

Local Level – Employees are the least likely to know the ethical risks since fewer resources are put in place to encourage ethical behavior.  Local government organizations have the lowest levels of reporting misconduct, only 67% are reporting.

Types of Misconduct

The most common type of misconduct observed in government offices include conflicts of interest, abusive behavior, and lying to employees.  However, overt, illegal misconduct has declined since 2000.  The survey also shows that fraud in government offices is as common as in business offices.  While the government has taken many steps to try to combat business fraud, it should also be aware of fraud in its own offices.

Whistleblowing

Only 1 percent of reports are made using whisteblowing hotlines.  There are very few effective interventions in place.  Local government employees are also the most likely to face retaliation for reporting misconduct. 

The report states that government employees are most likely to report to their supervisors rather than to management.  The overall perception of senior level employees is negative.  The survey found 21 percent believe top leadership is not held accountable for their own ethics violations while 25 percent believe that top leadership tolerates retaliation against those who report violations.

The Good News: Government Can Change

The ERC emphasizes the importance of good ethics and compliance programs along with creating strong ethical cultures.  Research has shown that effective implementation of both has reduced incidences of misconduct.  The report says the government is weakest in embedded ethical values in the workplace.  Offices can change if ethical values are instilled at all levels of government and throughout each organization.  The ERC recommends there be strong ethical leadership, supervisor reinforcement, peer commitment to ethics, and embedded ethical values.

To download the full report, please visit the Ethics Resource Center website.

Posted 1/30/01

2007 NATIONAL BUSINESS ETHICS SURVEY

An Inside View of Private Sector Ethics in the United States

The 2007 survey includes the results of interviews done with almost 2,000 employees from the private sector. Below are some key findings which show some significant changes from the previous report in 2005. For additional methodology related information, the full National Business Ethics Survey report is available at www.ethics.org

This year’s survey declares corporate America is at great risk.  Reports of misconduct are on the rise – since 2005, there has been a four percent increase in the number of misconduct reports.  The Ethics Resource Center (ERC), publisher of the study, says misconduct reporting is back to “pre-Enron levels.” 

Overall, no progress has been made in minimizing misconduct. Three forms of misconduct have risen significantly since 2005 – putting one’s own interests before the organization, lying, and e-mail and Internet abuse.  There is also an increasing percentage of employees who believe their co-workers are not committed to ethics.

These three types of misconduct pose the most severe risks to companies, according to the survey. High risk offenses happen often and are often not reported. They include Internet abuse, misreporting hours worked, lying to stakeholders, discrimination, safety violations, sexual harassment, and improper hiring practices. The last classification is those offenses which the ERC says pose a guarded risk to companies, or types of misconduct that happen less frequently, but often go unreported. They are environmental violations, misuse of confidential organization information, alteration of documents, and paying bribes.

Misconduct on the Rise

This year, more than half of the employees surveyed are reporting misconduct (56%).  The three most common types of misconduct reported include conflicts of interest (23%), abusive or intimidating behavior (21%), and lying to employees (20%).  The statistics are more troubling in “negative” work environments. ERC describes a negative work environment as one where employees feel:

• A lack of satisfaction with information from top management and/or supervisors
• A lack of trust that top management, supervisors, and/or coworkers will keep promises or commitments
•  The company rewards employees who are successful, even if it is through questionable means
  
  

• They are willing to seek advice about ethics questions that arise.
• They feel prepared to handle situations that could lead to misconduct.
• Employees are rewarded for ethical behavior.
• Their company does not reward success obtained through questionable means
• They feel positively about their company

ERC emphasizes that companies must institute programs that emphasize what employees should do, rather than what they should avoid.  Some examples of positive encouragement include training, evaluation, and advice lines.  The survey says creating an “enterprise-wide culture” will reduce misconduct by three-fourths and retaliation for reporting will be virtually eliminated.

Posted 11/28/07

2005 NATIONAL BUSINESS ETHICS SURVEY

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 situation

Also see our page on NBES on Whistleblowing

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