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July 11, 2019 By Richard Bowen

We’re getting better ethics grades!

Scrabble tiles spelling out EthicsHow would you rate your company’s ethical culture?

Here’s the good news… the corporate fraud and ethical scandals of the last ten plus years have shown a spotlight on the importance of ethics.

According to the 2019 Ethics and Compliance Program Effectiveness Report, based on a survey of 480 ethics, compliance and legal professionals at large companies (conducted by LRN Corporation), more companies are leveraging ethics and compliance as a strategy, embedding it throughout the organization.

“‘Operationalizing’ ethics and compliance programs instead of relying on checklists is increasingly necessary in order for companies to thrive today. In this time of radical evolution of workplace norms and social media transparency, this is a critical shift if organizations are to meet the expectation of government watchdogs while mitigating the growing risks,” says LRN Advisor Susan Divers.

It’s gratifying to see that overall, the survey which compared and contrasted ethics and compliance found more positive practices from past years surveys:

  • Bar graph illustrating some statistics from survey: 55% performance review, 31% bonus, 67% business iniaative
    Graphic by Candace Barnhill

    Most – 55% – of E&C and legal professionals said ethical behavior is now a major factor in their companies’ employee performance reviews, whereas only 35% of professionals said that in the 2018 survey.

  • Nearly a third of professionals – 31% – say ethical behavior plays a strong role in bonus allocation at their companies, compared with only 11% and 10% in the two previous years’ surveys.
  • The majority of professionals – 67% – say their companies modify or abandon business initiatives on the basis of ethical concerns.

There also appears to be an increased focus on values, with 87% of the respondents saying their companies have increasingly focused on emphasizing values over rules a 43% increase over the 2018 study.

In addition, 75% of the professionals surveyed said that their E & C programs drilled down to “root causes” rather than just following a reprimand process or making more rules.

It was also really heartening to learn that 90% of professionals from the best run E&C programs say that employees do not feel pressured to attain immediate goals at the expense of their own personal values. In fact, 80% of employees say that they are more likely to question decisions that actually conflict with their values.

According to Emily Miner, a member of the E&C advisory team at LRN, “Embedding E&C programs into organizational operations broadens the programs’ impact and makes it easier for employees to comply. The best programs have found ways to do that – often by making the E&C guidelines simpler and more accessible.”

There is still far to go.

Of the 480 professionals surveyed for the LRN report, only 49% say their companies’ senior leaders take action against compliance failures – and only 38% say company leaders support disciplinary action against high performers who are guilty of misconduct. Just 22% of ethics and compliance (E&C) professionals say their organization communicates lessons learned and remediation measures taken after an ethical lapse.

While, Susan Divers an LRN Advisor says, “Employees need a good moral compass. They don’t need a five-pound manual as a guide,” and while employees may be encouraged to speak up, many are still reluctant to report ethics violations especially if it means skipping authority levels to do so.

Graphic of large open book with multicolumn text blocks
Graphic by Jimmiet [CC0], via Wikimedia Commons
Let’s not forget that Enron had a five-pound manual, as did Citigroup, and Wells Fargo, and Volkswagen and Boeing most likely did as well! Still, it’s encouraging that, “By embedding E&C programs into organizational operations, the impact is greatly expanded – and it’s much easier for employees to comply,” Ms. Divers continues.

She is “encouraged to see that 55% of E&C professionals now say ethical behavior is a major factor in their companies’ performance reviews. That’s a full 28% increase from 2018.”

And as I continually preach, building an ethical culture demands that companies develop a proactive communication process that regards speaking up, and builds trust and respect.

Emily Miner, LRN Advisor agrees, “the best have ‘speak out, listen up’ cultures and talk openly about right and wrong, while also prioritizing ethics over short term results… These high-impact functions directly inform business decisions and regularly boost business performance.”

As I keep emphasizing, ethics pays off in the long run in dollars and cents. A firm’s culture is one of the strongest predictors of how much market value that firm will create for shareholder investments. A Great Place to Work® Institute report (2012) dramatically backed this up, noting that the stock price growth of the 100 firms they surveyed with the most ethical cultures outperformed stock market and peer measures by almost 300 percent coming out of the financial crisis. And subsequent reports continue to show the greater value of ethical cultures.

When employees report seeing unethical or actual illegal practices the lapses 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.

We have only to look at Wells Fargo’s balance sheet over the last 2 years and review their falling stock prices as a result of the continued unethical business practices they followed.

This most recent survey, as well as downright common sense, dictates that leadership which places an emphasis on ethics, with an embedded culture that honors and rewards speaking up and listening – from the top down – builds trust and overall better company performance.

Embedding an ethical culture is not rocket science. But, it requires diligence. Companies need to more frequently:

Graphic showing communication styles on multicolored background.
Graphic by Bovee and Thill, CC by 2.0, courtesy of Flickr
  • Talk about values and make them a regular and public part of business decision making.
  • Continue to encourage diverse opinions, candor and thoughtful dissent at all levels of the organization.
  • When there are problems and when misconduct occurs, it’s important to quickly respond in a timely manner.
  • Integrate company values into both company-wide metrics/ scorecards, employee performance evaluations, bonuses and reward systems.
  • Continually talk about their values.
  • And last and definitely not least, hear and value employees as individuals.

By recognizing, rewarding, promoting and publicly celebrating speaking up and values focused behavior, an ethical culture is built that survives the test of time.

A Tribute to Ross Perot
Happy Birthday USA…Celebrating the 4th Of July

Tagged With: ethical leadership, Ethics

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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.

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What People Are Saying About Richard M. Bowen

William D. Cohan"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst."

~ William D. Cohan, NY Times Best Selling Author
2017-06-30T10:08:59-05:00
"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst." ~ William D. Cohan, NY Times Best Selling Author
https://richardmbowen.com/testimonials/2556/

Eileen McDonnell"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger."

~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
2015-02-13T19:51:19-06:00
"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger." ~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
https://richardmbowen.com/testimonials/711/

Ben Stein"Richard Bowen, you are a star and a hero."

~ Ben Stein, Economist and Political Commentator
2015-02-13T19:50:26-06:00
"Richard Bowen, you are a star and a hero." ~ Ben Stein, Economist and Political Commentator
https://richardmbowen.com/testimonials/712/

Jim Farrell"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership."

~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
2014-12-28T19:48:17-06:00
"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership." ~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
https://richardmbowen.com/testimonials/532/

Dennis McCuistion"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years."

~ Dennis McCuistion, Host of the McCuistion TV program
2014-12-28T19:48:06-06:00
"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years." ~ Dennis McCuistion, Host of the McCuistion TV program
https://richardmbowen.com/testimonials/533/

Betty Garrett"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!"

~ Betty Garrett, Garrett Speakers International
2014-12-28T19:47:50-06:00
"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!" ~ Betty Garrett, Garrett Speakers International
https://richardmbowen.com/testimonials/531/

fred-timmons"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences."

~ Fred Timmons, Chairman of The Texas Society of CPA's
2014-12-28T19:47:22-06:00
"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences." ~ Fred Timmons, Chairman of The Texas Society of CPA's
https://richardmbowen.com/testimonials/530/

Presentation Topics

Playing for High Stakes: The Principles and Practice of Ethical Leadership

Dark Citi: The Story of a Whistleblower

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Now an ethical leadership speaker, Richard Bowen was Citigroup's Business Chief Underwriter during the housing bubble.

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