According to research by the ethics and compliance firm LRN Corporation, the current pandemic may prove to be an unintended test of cultures and codes of conduct as businesses determine how to reopen and navigate the inevitable strain of operating during a pandemic.
Their new report, Confronting the Root Causes of Misconduct, was based on a survey of 500 ethics, compliance, and legal professionals. Their assessment of companies’ cultures of accountability is mixed:
- Only 46% of ethics and compliance (E&C) professionals say their organizations’ senior leaders support effective sanctions or penalties on senior executives and high performers who are involved in misconduct.
- Just 37% say their organization takes ethics into account when setting sales targets or goals.
- Only 56% say their organization requires ethical conduct to be evaluated when deciding on employee bonuses.
- Just 39% said their company takes ethics into account when hiring managers and executives.
- Only 44% say their organization involves the E&C function when doing due diligence for mergers and acquisitions.
It is not all bad news though. According the survey, 75% of ethics and compliance professionals believe their organization takes ethical behavior into account when deciding on promotions; 83% say they believe the ethics and compliance function at their firm has the ability to raise issues directly with the c-suite or board; and 80% believe the function has the necessary resources to carry out the mission to inspire ethical behavior.
“We’ve seen some inspiring examples of values-based decision-making during COVID-19. Think about leaders whose organizations have voluntarily put people first, protected their workforce, voluntarily shut down when authorized to be open; CEOs who hold weekly all-hands virtual meetings to answer concerns across their organizations; and of course employees in healthcare, electrical grid maintenance, and other critical areas who, despite personal risk, go to work in order to ensure the welfare of others. These are examples of strong ethical cultures at work, of ethics programs with real impact,” said LRN Senior Advisor Susan Divers.
At organizations that have established and nurtured a strong ethical culture, leaders at all levels model values-based behaviors and bring to life the organization’s Code of Conduct. “When values-based culture reigns, ethics and compliance is not just left to lawyers, it’s everyone’s responsibility. One could say the values are in the drinking water. These companies take ethics and compliance into account when setting revenue targets, and they endeavor to not incentivize misconduct and to avoid sending mixed messages when it comes to following the letter and spirit of internal controls,” said Emily Miner, Senior Advisor at LRN.
LRN’s analysis of its survey shows that organizations with those characteristics are the most likely to have high-impact E&C programs. According to the findings:
- Companies with high-impact E&C programs are 60% more likely than those with less effective programs to make ethical behavior a criterion in bonus allocations.
- Companies with high-impact E&C programs are 57% more likely than other firms to hold senior executives accountable for misconduct.
- Employees of organizations where leaders weigh E&C criteria as they pursue business and revenue opportunities are 4.3 times more likely to question decisions that seem to conflict with organizational values; 3.8 times more likely to do the “right thing,” even if it’s not in their personal best interest; and 3.2 times more likely to speak up or speak out, even in front of managers.
The impact of lapses in ethics and compliance can have a dramatic long-term impact on the business and its employment brand. Ensuring you have the proper systems and training in place to monitor adherence to corporate policies and expectations will be key.
Source: https://www.globenewswire.com/news-release/2020/05/19/2035768/0/en/New-Study-on-Corporate-Misconduct-May-Shed-Light-on-How-Companies-Will-Navigate-Post-COVID-Reality.html