[author: Jaclyn Jaeger]
The Ethics & Compliance Initiative (ECI) recently released its 2023 Global Business Ethics Survey (GBES), which revealed some very concerning findings. For ethics and compliance officers globally, the findings highlight general areas of ethics and compliance (E&C) programs most in need of attention and improvement.
“Businesses all around the world face higher risks today for misconduct and for potential loss of public trust than ever before in the history of this study,” said ECI President Pat Harned on an ECI-hosted webinar analyzing the findings of the report.
The 2023 GBES report, which represents data gathered from 42 countries and more than 70,000 employees globally, highlighted five key findings, four of which point to weaknesses in many E&C programs. Below is a discussion of each of those four metrics, followed by tips on ways that E&C professionals can improve their organization’s ethics and compliance program.
Five key findings
Pressure to compromise workplace standards or the law remains exceedingly high. According to ECI’s analysis, this trend has continued since the COVID-19 pandemic. In the 2023 findings of the GBES report, 28% of respondents said they felt such pressure, compared to 29% of respondents in 2020, and 20% in 2019.
Harned said this finding is also a proxy for whether people have observed misconduct. “Eighty-four percent that said they felt pressure also said they’ve observed misconduct,” she said.
Reporting of misconduct reached a record high. According to the report’s findings, 72% of global respondents who said they observed misconduct also said they reported it, either within the organization or externally. Given that the observing of misconduct hovers close to the reporting of misconduct is a “silver lining,” said Terri Civitello, global chief ethics and compliance officer at Otis Elevators, who spoke on the ECI webinar.
“The increased level of reporting means people are unwilling to accept things are being done in an unethical or noncompliant way. That, to me, is very encouraging,” added Greg Keeling, director of ethics and conduct at BMO Financial Group.
A research summary of the report’s key findings issued by ECI recommends that E&C teams “can demonstrate a dedication to building an ethical culture by encouraging employees to report misconduct and ensuring that new reports are addressed effectively.”
According to ECI’s research, a few of the top reasons why people do not report misconduct include not trusting that a report will be kept confidential; fear of losing their job; fear of someone else getting into trouble; or not believing any corrective action will be taken.
Keeling suggested that one way to encourage people to report potential misconduct is to have a transparent process to ensure reports are elevated and reviewed at a high level in the organization. In practice, this could involve the employee relations and ethics and compliance teams coming together to get on the same page about the process involved when an employee makes a report, ensuring there is consistency in the way that issues are reviewed, and in the way the organization determines findings of misconduct and takes any disciplinary actions, he said.
Keeling further suggested that some questions to consider include, for example, “Do you have good processes to follow up with people? Do you have clear communication, consistent communication about the fact that there won’t be any retaliation? Do you demonstrate that, and do you follow up to ensure that those who have reported have not experienced retaliation?”
Observed misconduct in the workplace is at an all-time high. “The extent to which employees have observed misconduct in the last 12 months is higher now than what it has been in the past,” Harned noted. In the 2023 GBES report, 65% of employee respondents said they observed misconduct, compared to 60% in 2020. Among U.S. respondents, specifically, 53% said they observed misconduct.
ECI recommends in its research summary that E&C professionals “be on the lookout for potential ethics and compliance violations. Protect yourself from potential liabilities with preparation and education for you and your team. Organizations with higher misconduct rates are at risk for economic or legal setbacks.”
Retaliation against employees who reported misconduct remained steady. According to the report’s findings, 46% of respondents globally in both the 2023 report and the 2020 report who reported misconduct said they experienced retaliation.
“When retaliation rates are lowered, employees are likely to feel more comfortable reporting wrongdoing,” ECI stated in its summary report. “If observed misconduct reporters are not protected, fewer reports of misconduct will come in, putting your organization at risk.”
Few employees work in a strong ethical culture. According to the survey, 87% of global respondents indicated they do not work in a strong ethical culture, while 13% of respondents indicated they do. “E&C practitioners and leaders should work to increase this rate, as having stronger ethical cultures is linked with reducing wrongdoing by over 400%,” ECI stated in its summary report.
Employees were not directly asked if they worked in a strong ethical culture. Rather, this finding was developed, tested, and validated from multiple questions fielded over the years, Harned said. The finding represents, for example, a measure of the perceptions about top management and supervisors, their commitment to ethics, and the behaviors they model, as well as the extent to which people believe there is accountability in the organization. “So, there are a lot of numbers that drive this finding,” she said.
Tips for improving E&C program effectiveness
Collectively, the findings discussed above are indicative of not only what is happening in organizations right now, Harned concluded, “but also what we can expect to see in the future, unless organizations take steps to reduce their risk.”
“The higher the quality of the ethics and compliance program, the more a company does to invest in a high-quality ethics and compliance program, the better the payoff,” Harned added. “Ethics and compliance programs make a very, very big difference not only in the strength of culture in an organization, but in employee conduct.”
Yet, according to the survey findings, just 30% of employees globally reported their organizations are taking appropriate measures to reduce their compliance risk. Many E&C professionals recognize that what constitutes a high-quality E&C program will vary, depending on industry, region, and organization size. “So, there is no one size fits all,” Harned said.
That said, there are certain elements that are indicative of a high-quality E&C program (HQP). To help organizations more clearly understand what these elements are, ECI has developed its “HQP Measurement Framework,” designed to serve as an assessment tool for E&C professionals to gauge the maturity of their own E&C programs, and where improvements need to be made.
A working group of ECI members developed the framework, based on principles highlighted in an April 2016 Blue Ribbon Panel Report, which discussed five core principles of high-quality ethics and compliance programs. One key question the framework helps to address is, “Where are you putting your energies, and are they going to the right place to improve your E&C program?” Harned said.
“You can’t fix what you don’t understand,” Keeling said. That is why having assessment frameworks and benchmark reports like the kind ECI provides serve as valuable resources for E&C professionals. “If you don’t know what your employees are feeling, you’re working in a vacuum,” Keeling concluded, “and you’re never going to be focusing your resources on the right challenges.”