I recently had the opportunity to visit with Dr. Pat Harned, President of the Ethics & Compliance Initiative (ECI), about the organization’s 2021 Global Business Ethics Survey (GBES). Since 1994, ECI has conducted this cross-sectional study of workplace conduct from the employee’s perspective. ECI’s GBES data provides the only global benchmark on the state of ethics and compliance (E&C) in business. This year’s GBES is the first compliance related survey conducted after the global pandemic hit. It has significant information for the compliance professional which they need to consider for every compliance program, literally on a world-wide basis.
While a multitude of factors inﬂuence ethical behavior, the GBES reports interplay of four major ethics outcomes are tied to the daily decisions employees make with respect to how they behave in the workplace. These are: pressure in the workplace to compromise ethical standards; observations of misconduct; reporting misconduct; and, ultimately, the retaliation perceived by employees after they reported misconduct. Some of this year’s findings are quite troubling as they are clearly trending in disturbing directions.
The GBES findings pointed to a year of extremes. The promising news is that culture strength is at one of its highest points in the 20-year look at US data, and employees continued to report misconduct they had observed at very high rates. Despite the turbulence of the pandemic, culture strength and rates of reporting misconduct remained intact or improved. Slightly more than one in ﬁve US employees (21%) were in workplaces with a strong ethical culture, mirroring ECI’s ﬁnding in 2017. More, and continuing a positive trend that began after 2013, employees who observed misconduct in 2020 were more likely to report their observation than they were in 2017. This indicates that there continues to be a drive towards substantial progress by instilling elements that encourage ethical behavior and promote ethical culture in the workplace. A strong ethical culture is characterized by accountability for wrongdoing, trust in and communication from leadership, and all employees setting a good example of ethical workplace behavior. More troubling, employees were more likely to feel pressure to compromise their organization’s ethics standards during periods of organizational change, such as what we have just experienced over the past year. In 2020, employee pressure was at the highest it has been in the US since 2000, and it has more than doubled since 2017.
There was also a disturbing gap between the perceptions of senior management and front-line employees. The differences between top managers and individual contributors were particularly pronounced. Top managers were more likely to say they worked in strong ethical cultures, but they were also more likely to say they experienced pressure, observed misconduct and experienced retaliation. Some of this may be due to top managers’ tendencies to ignore issues and evaluate themselves, their coworkers and their peers more favorably than may be warranted. The same was true around perceptions of compliance program effectiveness. Only slightly more than one-half of top-management employees indicated working in an organization with an effective compliance program, and fewer than one in four non-management employees indicated the same.
Globally, these trends largely mirrored those of the US trends. The most promising news is that reporting is at one of its highest points since ECI began collecting global data in 2015. However, pressure to compromise standards and rates of retaliation are also at their highest points since 2015. And following a decrease in 2019, observed misconduct is now at the same level it was in 2015.
Covid-19 and its Impact on Culture
The GBES survey went out while every company was undergoing significant change. Prior GBES reports have demonstrated organizational changes have an adverse effect on ethics outcomes. This was only more so over the past year. The GBES indicates that the pandemic and “the changes organizations were forced to make in response, had a substantial impact on organizations that reported having at least one organizational change.” This means that in the US and globally, pressure, observed misconduct, reporting and retaliation all increased. Particularly noteworthy are the jumps in pressure and observed misconduct.
What were some of the traditional merger and acquisition (M&A) issues, new policies and procedures related to the pandemic and, more specifically, working remotely. Many, many employees reported unease around whether they would have a job or not. Many others were furloughed or had a reduction in hours.
It was this final point that the GBES called “recessionary tactics” and which have the greatest negative impact on culture. Such strategies include hiring freezes and production slowdowns and perhaps others which may have an impact on workplace ethics. The 2021 GBES looked back to 2009, where companies “implemented “recessionary tactics” to a greater degree than they did in 2011. Compared with 2011, more employees were working in organizations that had undertaken a tactic against the recession, such as hiring freezes or production slowdowns.” The GBES stated, “The data suggest that organizations move cautiously forward if implementing organizational changes at this time or in the upcoming months. If the economy worsens and organizations react by implementing recessionary tactics, it is strongly advised that they take precautionary action to limit increases in pressure, misconduct and retaliation, and support behaviors that epitomize a strong ethics culture.”
Join me tomorrow where I look at the trends in this year’s GBES.