The Ethics & Compliance Initiative (ECI), the oldest ethics research and best practice community in the US, recently released the second installment of the 2018 Global Business Ethics Survey (GBES). The report’s findings focus on the impact that an ethics and compliance (E&C) program has in the workplace, and the return on investment (ROI) for program development and improvement.
The GBES, which comes out four times a year, is considered the most comprehensive, cross-cultural survey of workplace behavior. The data gathered clearly points out that “improving the quality of certain factors of an Ethics and Compliance (E&C) program, at any stage of the program implementation process, has a positive impact to the organization.”
One of the key questions asked by the Ethics & Compliance Initiatives is, “does it make a difference when a company dedicates more resources and heightens the priority of their E&C efforts?”
To find answers, ECI queried employees of companies with E&C programs. ECI also separately evaluated the degree of E&C implementation according to their High Quality Program implementation continuum. They found even the minimum standard of E&C implementation gave very encouraging results. Not surprisingly they also found that employee pressure to compromise values is consistent with the rise and fall of the S&P index.
They asked: Does E & C program quality matter?
Is there a measurable ROI?
Is the investment impact felt?
They found certain factors central to business strategy in those who follow an ethical construct. Risks are identified, owned, managed and mitigated; a culture of integrity is critical and leaders at all levels must build and sustain that. In addition, the organization encourages, protects and values the reporting of concerns and suspected wrongdoing. The organization also acts and holds itself accountable when wrongdoing occurs.
When employees are encouraged to base decision making on organizational values and standards, favorable ethics outcomes increased by 11X; when employees felt that their supervisors would hold them accountable for wrongdoing, favorable ethics outcomes increased 12X; and when employees felt encouraged to speak up even with bad news, favorable ethics outcomes increased by 14X.
Without question, the results absolutely confirm what I and others who speak for and consult with companies about the necessity of establishing an ethical culture have known and advocate: ethical behaviors pay off – for the better.
This is not new news. In fact in 2012, the Great Place to Work® Institute report noted the stock price growth of the 100 firms with the most ethical cultures outperformed stock market and peer measures by almost 300 percent. Thus, researchers have shown that a firm’s culture is the strongest predictor of how much market value that firm will create for shareholder investments.
Yet, in at least half of our workplaces, employees report seeing unethical or actual illegal practices. Lapses in ethics are costly in loss of trust and erosion of confidence on the part of employees and customers. And, there are financial consequences including fines, loss of business, bankruptcies, and more which I’ve talked and written about often. Yet, unethical practices continue, despite the cost in employee turnover, loss of customer loyalty, lost revenue and the list goes on.
The GBES report found that even if an organization adopts ethics and compliance principles at a minimal standard, employees were 132% more likely to report misconduct and 270% more likely to be satisfied with the organizations’ response compared to an organization with no program.
The survey found that in stronger ethical cultures employees have a greater tendency to report observed misconduct – 83%, compared to 58% in weaker cultures. Additionally, for those companies who have not implemented an E&C program, only 34% of employees observing misconduct reported it and only 20% of those reporting it felt satisfied with the outcome.
However, even if the program implementation is at the “minimum” level, 79% of employees observing misconduct reported it with 74% of those reporting the misconduct being satisfied with the outcome. In those companies with high-quality program implementation, 93% of employees seeing misconduct reported it with 94% of those reporting satisfied with the outcome of their reporting.
These findings absolutely reinforce the concept that it is employees feeling valued, respected and expected by the company to provide feedback when they observe misconduct, without being retaliated against, that outline the true hallmarks of an ethical corporate culture.
According to Patricia Harned, CEO of ECI, “This report makes the case that when it comes to ethics & compliance programs, every effort by an organization makes a difference … Yet program quality matters – the higher the quality, the bigger the ROI for the organization.”
In 2013, ECI convened an independent panel of experts to develop the 5 Principles of a High-Quality E&C Program (HQP). Since its release, hundreds of E&C practitioners have been trained using these principles which can be found on their resource site.
This report clearly points out “that as the quality and strength of ethics and compliance programs increase, organizations see improvements in several key performance areas: the establishment of a stronger, more resilient culture, and significant decrease in misconduct.” ECI also “found that adhering to any of the 15 operational standards of HQP resulted in dramatic return on investment. In organizations where HQP objectives are present, employees demonstrated a tenfold increase in confidence and trust in the organization.”
One of their clients, Ellen Martin, Vice President of Ethics and Business Conduct, The Boeing Company says, “Across business, leaders have the responsibility to develop and support high quality ethics programs to help reduce risk and drive organizational success.”
As I’ve mentioned before, if you surveyed most CEO’s, they would cite ethics and integrity as being qualities necessary to an organization’s wellbeing and as critical leadership traits. Kouzes and Posner’s seminal work, The Leadership Challenge, mentioned in a previous post, points out that honesty is the #1 trait follower’s demand in their leaders. In fact, ethical behavior is the foundation upon which a company’s culture must be built.
So many of us are asking, “Where do we go from here?”
“The answer to this question is not only to focus on what people sometimes do wrong, but also to consider how we can help each other do right. We need to begin a conversation about respect as a core value in our workplaces so that our employees have a shared understanding about how they should treat one another. Respect as a standard also provides a common language to help individuals raise and resolve sensitive concerns.”
There is no question that truly ethical companies value and respect employee feedback, which is why employees of ethical companies feel valued and empowered to provide management feedback on what needs to be changed to improve the company and meet its customer’s needs.
We can’t stop there. We still have a long way to go. As Joyce E.A. Russell, Director of the Executive Coaching and Leadership Development program at Maryland’s Robert H. Smith School of Business, says, “there is still work to be done.” Ms. Russell continues, “Since leaders are “watched” 24/7 both on and off the job, it is imperative that they continue to set a good ethical example and reward others who do the same. Only then will we have companies that truly embody an ethical workplace.”
(Graphics used with permission of the Ethics & Compliance Initiative, 2650 Park Tower Dr, Vienna, VA 22180)
Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
