Ethics in the Workplace
When we think about workplace ethics, the first thing that comes to mind is a code of conduct that influences the development of an ethical culture and provides direction to steer the ethical climate toward right behavior. A code goes beyond what is legal for an organization and provides normative guidelines for ethical conduct.
Ethical Culture
Support for ethical behavior from top management is a critical component of fostering an ethical climate. Employees who sense that top managers act unethically quickly lose trust in those managers. The result can be to become disillusioned with the goals of the organization and question whether the corporate culture is one that is consistent with individual, personal values and beliefs.
Here is a list of measures that should be taken to establish an ethical culture:
- Establish clear policies on ethical conduct including a code of ethics.
- Develop an ethics training program that instills a commitment to act ethically and explains code provisions.
- Assign a top-level officer, such as the Chief Ethics and Compliance Officer (CECO), to oversee compliance with ethics policies.
- Use internal auditors to investigate whether ethics policies have been followed in practice.
- Establish strong internal controls to prevent and detect unethical behaviors, such as fraud.
- Establish whistleblowing policies, including reporting outlets.
- Establish an ethics hotline where employees can discuss questionable behavior on an anonymous basis.
- Have employees sign a statement that they have complied with ethical policies.
- Enforce ethics policies fairly and take immediate action against those who violate the policies.
- Reward ethical behavior by including it in the performance evaluation system.
Compliance Function
According to a Deloitte study: Building world-class ethics and compliance programs; there are five factors that separate the “good” from the “great” compliance programs including the following:15
- Tone at the top
- Corporate culture
- Risk assessments
- The Chief Compliance Officer (CCO)
- Testing and monitoring
With respect to the tone at the top, the board of directors and senior management should do more than pay “lip service” to ethics and compliance. They need to provide the necessary tools for individuals who have day-to-day responsibilities to mitigate risks and build organizational trust. Along these lines, a culture of integrity is critical to any effective ethics and compliance program.
Integrity: The Basis for Trust in the Workplace
Albert Camus, the French Nobel Prize–winning author, journalist, and philosopher, said, “Integrity has no need of rules.” People of integrity are self-driven to do the right thing. Leaders of integrity act on the knowledge that their actions are ethical and provide the basis for others in the workplace to follow their lead.
The 2019 KPMG Integrity Survey provides an insight look at the views of 3,300 employees from all levels within the organization that provides worrying evidence of damaging, improper behavior. Seventy-six percent of respondents said they personally observed misconduct in 2019. It’s encouraging to learn that 87 percent of employees would inform their supervisor, in part because it is the generally recognized first step along the pathway to determine whether to blow the whistle externally. However, it’s troubling that 77 percent would look the other way. This relatively high percentage may be due to the fear of retaliation and/or the “kill the messenger” syndrome whereby employees do not report fraud because they are concerned about being ostracized by the organization for doing so.
The tone at the top set by top management is a determining factor in creating organizational commitment to high ethics and integrity. Eighty percent of respondents believed their CEO and other senior executives set the right “tone at the top” and 81 percent said the same about their local managers and supervisors. A troubling result is that 69 percent did not believe that the CEO and other senior executives know what types of behaviors are taking place at their organization. This could be because while internal controls exist to detect fraud, they are not being used by top management indicating a disconnect with an ethical organizational culture.
Trust: The Basis of Ethics in the Workplace
PwC released its study, The Complexity of Trust: PwC’s Trust in US Business Survey, that includes the views of consumers, employees, and businesses about the foundational elements of trust. Exhibit 3.6 shows those results. Trust is the basis for an ethical culture and one that should be promoted by the CCO, CFO and CEO, as well as the board of directors. Here are the results.
Trust is an essential element of workplace ethics. Without trust, employees cannot believe what a manager/boss says to them or requires of them. Superiors may not be able to believe what employees say about completing work projects. Employees are responsible for their actions. Management expects that to be reliable and act in accordance with the principles set in an ethics code.
Foundational Elements of Trust
| Consumer | Employee | Business | |
| Protecting data and cybersecurity | 62% | 62% | 70% |
| Treats employees well | 56% | 53% | 55% |
| Ethical business practices | 53% | 52% | 52% |
| Admitting to mistakes | 49% | 46% | 46% |
| Going beyond commitments | 36% | 34% | 37% |
| Addressing income inequality | 32% | 34% | 41% |
| Balancing corporate profit with purpose | 30% | 32% | 40% |
| Authenticity in corporate messaging and communications | 29% | 31% | 41% |
| Sustainable value chain management | 28% | 27% | 43% |
| Responsible artificial intelligence | 27% | 27% | 43% |
| Holding company leadership accountable | 27% | 34% | 26% |
| Transparency and reporting of ESG | 26% | 25% | 41% |
Employees Perceptions of Ethics in the Workplace
ECI released its 2023 Global Business Ethics Survey (GBES) that tracks the following ethics outcomes for 20 years: pressure in the workplace to compromise ethical standards; observations of misconduct; reporting misconduct; and ultimately, retaliation perceived by employees after they report misconduct. It covers 42 countries, including 75,495 employees. Selected results include:
- Almost two-thirds of employees (a global median of 65 percent) said that within the last 12 months they observed at least one act they deemed to be a violation of their organization’s standards or the law.
- 72 percent of employees who observed misconduct reported their observation.
- Almost half of employees (46 percent) indicated they experienced retaliation for reporting observed misconduct.
- 87 percent of employees indicated that their workplace does not have a strong ethical culture.
One striking difference with the results for the United States is that 79 percent of U.S. employees reported experiencing retaliation, a much higher percentage than globally.
An International Survey of Employeesconducted in 2021 by the United Kingdom’s Institute of Business Ethics reports the results of questioning 10,000 employees in 13 countries about their attitudes to and perceptions of ethics in their organizations. The overall results are as follows:
- 86 percent report that honesty is practiced always or frequently.
- 53 percent indicate there is a mechanism to report misconduct confidentially.
- 57 percent of employees aware of ethical misconduct raised their concerns.
- Only 43 percent of employees who spoke up about ethical misconduct experienced retaliation as a result.
- 48 percent of employees in organizations with a comprehensive ethics program say that their line manager rewards employees who get good results, even if they use practices that are ethically questionable.
The results are mixed. Only 53 percent of organizations have a speak up mechanism to report wrongdoing confidentially, which seems low in the post SOX and Dodd-Frank environment. Slightly more (57 percent) raised their concerns when ethical misconduct exists, which implies that the culture of many organizations does not promote whistleblowing. Moreover, 43 percent of reporters were retaliated against after reporting the misconduct. This could be because of the “kill the messenger” syndrome whereby employees who report wrongdoing suffer the consequences of reporting it because the organization is not open to correcting for misconduct.
Additional results of the survey show the effects of pressure in the workplace on ethical behavior. Employees were asked: Have you felt pressured to compromise your current organization’s standards of ethical conduct? The overall average across all countries was 11 percent, while the U.S. average was 14 percent. This seems a bit low given the 43 percent who said they were retaliated against for reporting misconduct. It could be that employees did not connect retaliation with organizational ethical standards. In other words, the question lacked specificity.
The exhibit below shows the main pressures on employees to act unethically:
| Pressures | 2021 Overall Average | U.S. Average |
| Time pressure/unrealistic deadlines | 35% | 30% |
| I was following my boss’s orders | 33% | 30% |
| We were under-resourced | 23% | 27% |
| I was being asked to take shortcuts | 23% | 30% |
| I had to meet unrealistic business objectives | 20% | 24% |
| I felt peer pressure to be a team player | 20% | 20% |
| I was trying to save my job | 18% | 17% |
| There were financial/budgeting pressures at the company | 17% | 19% |
| I wanted to help the organization perform better | 16% | 18% |
| My organization has an unethical culture | 15% | 13% |
| Other | 1% | 1% |
| Prefer not to say | 2% | 2% |
There is a lot more that can be said about ethics in the workplace. For example, what are the effects of employees using social media in the workplace and/or when they use it to criticize management or the organization. I will address these matters in my next blog.
Posted by Steven Mintz, Ph.D., aka Ethics Sage, on September 11, 2024. You can sign up for his newsletter and learn more about his activities at: https://www.stevenmintzethics.com/.