Are ethics too expensive?
Hard-hit firms are cutting training. But hard times are when workers need it most.
After a raft of early-decade scandals like Enron and Worldcom, an embarrassed corporate America built and developed programs to encourage high ethical standards in the workplace. Now recession is pressuring those same companies to trim those programs.Skip to next paragraph
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They aren’t really mission-critical, the thinking goes. You can always catch up on training next year.
There’s just one problem.
Stressful periods – like the great recession of 2008-09 – are precisely the times when managers and employees most need a little help to keep them on the straight and narrow.
“In a time where the economy is bad and corporations are struggling to survive, there is more temptation to cut corners and step over the ethical line than there is in other times,” says Michael Hoffman, executive director of Bentley University’s Center for Business Ethics in Waltham, Mass.
There’s some statistical evidence to back this up. Workplace misconduct tends to increase by at least 11 percent during periods of turmoil, including times of layoffs and budget cuts, according to a 2008 report by the Ethics Resource Center in Arlington, Va.
Also, 46 percent of executives expect fraud levels in their organizations to increase this year, according to a Compliance Week/Deloitte survey of 249 public company executives in December. Only 3.6 percent expected it to go down.
Even regulators are worried. In a rare bit of budgeting advice, the Securities and Exchange Commission in December warned firms not to make short shrift of compliance programs, which often include ethics training, when cutting expenses. Last month, panelists at a Washington, D.C., conference coached international business leaders on how to manage an effective compliance program in a resource-constrained environment.
Companies, in other words, are trying to pursue ethics on the cheap.
The Ethics & Compliance Officer Association says that at least six of its member firms have recently cut ethics budgets, and at least two others have consolidated their ethics and compliance programs. ECOA declined to name the companies. And firms making such cuts don’t exactly trumpet the fact.
The question is: Is cut-rate ethics really feasible?
“The main thing that [clients] say – and this may be optimistic – is that they’re deferring,” says Steve Priest, president of Ethical Leadership Group, a consulting firm in Wilmette, Ill. “They’re saying, ‘This is not the year we can do assessments, do training, or engage managers’ ” in ethics initiatives.
One possible solution: Make the ethics arena more efficient.