Fortune 500 Firms Face Unique Pressures Leading to Ethical Lapses, Report Reveals

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By Rhonda Smith  

U.S. companies that earn the most revenue face unique challenges that can increase the level of ethical misconduct among their employees, according to a survey report released July 24 by the Ethics Resource Center in Arlington, Va.

Misconduct most often reported by employees at such companies includes delivering goods not up to specifications, stealing, abusive behavior, and health/safety violations, the report noted. Other types of misconduct frequently reported are sexual harassment, conflicts of interest, falsifying time reports, and breaching employee privacy.

Patricia Harned, president of nonprofit research organization ERC, told BNA July 25 there were two primary surprises in survey responses.

“An overwhelming number of employees were aware that their companies had done a lot to put ethics and compliance programs in place,” she said. “At the same time, we were really surprised at the very high reporting rate; when employees saw misconduct, they were willing to report it.”

The National Business Ethics Survey of Fortune 500 Employees is based on 2,044 online responses in June from workers at U.S.-based, for-profit companies that have annual revenue of about $5 billion or more.

Ethics Programs Valuable.

The report noted that 60 percent of Fortune 500 companies operate comprehensive ethics and compliance program, as measured by ERC. In contrast, only 41 percent of all U.S. companies operate such programs, it said.

Having such programs in place is important, the report said, because employee misconduct can be costly. “Depending on the exact nature and frequency of misconduct, employees who break the rules hurt morale, reduce efficiency and profitability, and expose the company to legal liability,” ERC said.

The report also said employees need more information on, and reassurance about, their concerns about ethical wrongdoing within their organizations. ERC noted that 42 percent of employees who saw misconduct and decided not to report it said they had doubts about the confidentiality of the process. Meanwhile, 15 percent said they did not report misconduct because they did not know whom to contact, the report noted.

Most and Least Reported Violations.

The three least reported forms of misconduct, according to the survey, are personal business on company time (38 percent), internet abuse (42 percent), and inappropriate social networking (49 percent.)

The three most reported forms of misconduct are bribes to public officials (77 percent), delivering goods not up to specifications (79 percent), and bribes to clients (79 percent).

“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, which may create tolerance for more widespread violations,” the report said.

Ethics in Evaluations.

For Fortune 500 employers that want to improve their ethical performance, ERC recommended making ethics part of employee evaluations. In particular, Harned said, ethics-based goals should apply to the organization's senior business leaders.

“A lot of these organizations have very sophisticated performance review processes that can look at ethics as a part of performance while they look at overall business objectives,” Harned said. “But it's not often that companies think of this as a specific performance goal that should be measured.”

Other recommendations ERC made in the report include:

• Establish a baseline assessment to compare your ethics and compliance program against the requirements outlined in the U.S. Sentencing Commission's 1991 Federal Sentencing Guidelines for Organizations. “The goal is a living, breathing program that sets clear standards and helps employees, including managers, live up to them,” ERC said.

• Develop a set of values and communicate them to workers. “The values should match the way you operate,” the report said. “If that is not the case, now is the time to take a hard look at the company and find areas where adjustments are in order.”

• Implement separate training components for distinct groups of employees, in particular supervisors and middle managers who set the tone for employees who report to them.

• Provide workers with a clear set of guidelines for reporting misconduct, and protect them from retaliation. “Even after their reports have been addressed, routinely check in with them to make sure that they have not been negatively impacted by their decision to blow the whistle,” ERC said.

• Make financial and staff resources available to operate your program effectively.

• Measure your program and the strength of your company's “ethics culture.” Do this consistently, ERC said, to determine “what works, what does not, and where you can do better.”

 

By Rhonda Smith  


The National Business Ethics Survey of Fortune 500 Employees is available at http://ethics.org/nbes/.