Taking the Ethics Pulse: Challenges for 2012

By Keith T. Darcy

 
Organizations seeking to establish ethical culture must focus on building a sacred trust with all of their stakeholders
Quickly scan these headlines:
  • “Raj Rajaratnam Found Guilty of Insider Trading; Sentenced to 11½ years in jail.”
  • “U.S. Targets Insider Culture: Ex-Goldman Director Gupta Indicted”
  • “NewsCorp Attorney Noted Hacking Culture in 2008”
  • “Congressional Review Notes a Culture of Compartmentalization at Fukushima”
  • “Closed Corporate Culture Blown Open: Olympus Admits Fraud”
  • “Culture Kills: The Legacy of Massey Energy”
  • “MF Global Collapses: $1 Billion Unaccounted For”
If these headlines are a bellwether for what lies ahead, then New Year 2012, still in its infancy, is off to a shaky start. New and as yet unidentified scandals seem poised to wreak havoc, like a tsunami waiting to engulf our shores. After all, many of these incidents were years in the making. It’s just a matter of time before new scandals dominate our headlines and are broadcast on our small screens and JumboTrons.

With this as a given, what course of action should we take in the New Year? Do we surrender our resolve and wait for the inevitable? Or do we strive to repair the world and achieve a diminution of scandals by fighting back through the greater adoption of ethical safeguards and behaviors?


Positive trends

As we take the ethics pulse for 2012, a good place to turn for a barometer reading is the recently published Ethics Resource Center’s (ERC’s) biennial National Business Ethics Survey.

ERC reports that in 2011 there were “historically low levels of misconduct in the American workplace and record high levels of employee reporting.” This is a positive trend, ERC believes, because employees who witnessed misconduct at their workplaces fell to a new low of 45 percent, down from 49 percent in 2009 and record highs in 2007 of 55 percent.

Additionally, ERC states that those who reported bad workplace behavior reached a record high of 65 percent, up from 63 percent in 2009 and 12 percentage points higher than the record low of 53 percent in 2005.

This trend can be attributed to a number of factors, including:
  • Business transparency and the widespread popularity of social media as a global communication tool
  • Whistleblowing via public websites like WikiLeaks and others
  • Anti-corruption initiatives, for example, the UN Convention Against Corruption, FCPA, OECD, U.K. Bribery Act, G-20 actions, and others
  • Governance reforms

Negative trends

The ERC also reported the rise of several alarming negative trends it identified as examples of “ominous warning signs of potentially significant ethics decline ahead.”

They noted that in 2011:
  • Retaliation against employee whistleblowers rose to more than one in five employees—or 22 percent—last year, up from 12 percent in 2007 and 15 percent in 2009.
  • The percentage of employees who perceived pressure to compromise standards to do their jobs climbed five points to 13 percent. The high for this question was in the year 2000 at 14 percent.
  • The share of companies with perceived weak ethics cultures climbed to 42 percent, up from 35 percent in 2009.

So how can businesses today eliminate, or diminish the effects of, these portentous “ominous warning signs?”


Establishing ethical culture

The answer lies in establishing ethical culture.

Experience tells us that mere compliance is insufficient for a company to meet its obligations to all stakeholders (customers, employees, suppliers, regulators, communities where it does business, etc.). Ethical decisions and actions are the extra-legal measures that companies commit to satisfy those stakeholder obligations. So-called “compliance-only” programs become “check-the-box” and fail to be intrinsic to the organization’s culture.

Organizations seeking to establish ethical culture must focus on building a sacred trust with all of their stakeholders. Transparency and social media are determining factors for transforming business cultures.

Social media communication tools enhance transparency. Customers talk to each other through social media. Suppliers talk to each other. Employees talk with each other. Everyone wants to know if they are being treated fairly. We live in an information age where there are no secrets, where there’s no place to hide. The most successful companies today incorporate this into their brand promise to all stakeholders. They align their business culture to deliver on these promises.


Joining the dialogue

Ethical cultures succeed when dialogue flourishes. Convicted felon Bernard Madoff got away with swindling billions of dollars from his unsuspecting customers in an audacious Ponzi scheme because he operated alone. He never engaged in dialogue. He purposely kept everyone—including members of his own family—in the dark.

If we strive to establish transparency, we must eliminate “corporate speak.” Given the proliferation of social media channels, corporate executives must leave their mahogany castles and join the dialogue. The networked conversations now taking place are real human voices. Businesses must tell the truth and apologize when they screw up. In this manner, they are held accountable. Trying to cover-up failures only undermines trust.

The U.S. Dodd-Frank Act, and the UK Bribery Act, protect whistleblowers for speaking up against malfeasance and misconduct. But next year’s published data regarding the role of whistleblowers will only reflect change for the better if everyone is deputized to blow the whistle when they witness or experience wrongdoing.


Strengthening the vital signs

If we want to create a brighter and more promising 2012, leaders of organizations must urge all to take a stake in supporting the ethical culture within their workplaces.

When companies build a culture of integrity, all flourish. In this environment, customers, employees, and management join forces to rally against internal or external threats and strengthen the vital signs in our workplaces.


Keith T. Darcy is executive director of the Ethics and Compliance Officer Association.