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Are ethics too expensive?

Hard-hit firms are cutting training. But hard times are when workers need it most.

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Training may be the core testing ground for the idea. Forty percent of companies have recently decreased overall employee training and another 14 percent are considering doing the same, according to a Hewitt Associates survey of 518 executives in April. Ethics training – one of the more expensive parts of compliance programs – would be a natural area of scrutiny for corporations looking to cut costs.

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“I don’t think a whistle-blower hot line costs all that much, and obviously an audit is something you have to do, so the [ethics cost] issue tends to come up in terms of training,” says Noah Pickus, director of the Kenan Institute for Ethics at Duke University in Durham, N.C. “That’s the thing that you’re going to cut.”

Ethics training is where workers develop skills for such challenges as saying no to bribery, spotting conflicts of interest, and treating subordinates with respect. The training impact tends to be highest through in-person interaction with instructors and colleagues, experts say, but that approach is also pricey since it may involve consultants, travel, and valuable time away from the job.

Online training, a growth area for the past five years, can help firms save on travel and other costs. Mr. Priest says companies are increasingly using Web-based seminars or “webinars” to cover content that, in the past, would have been addressed at conferences. But some in the ethics field question whether online training is very effective.

“A company comes out and says, ‘All of our employees have done ethics training,’ and then you ask what it is, and they’ve been filling out a questionnaire online,” says Frank Vogl, cofounder of Transparency International, an anticorruption organization. “I wonder: Wait a second. Is that training? Does it really sink in? Or are they going through a pro forma, compliance-type operation that really doesn’t have much effect?”

Ethicists say high-tech fixes aren’t the only option. Mr. Hoffman and Mr. Pickus urge companies to seize a recession-induced opportunity by integrating ethics discussions into routine staff meetings. This serves the dual function of saving on outside consulting fees and making managers more active players in the formation of ethical cultures.

Corporate leaders are finding no shortage of fodder for ethics discussions. At one media company that Pickus has advised, managers have recently begun reading aloud the company’s code of ethics at the start of every budget meeting. This practice reinforces values and frames every spending decision in a context of fairness and responsibility.

Still, cash-strapped companies must pick their battles. That sometimes means focusing where ethical infractions would pose the largest legal or reputational danger. For pinched clients, Daylight Forensic & Advisory sometimes does a data analysis to identify an organization’s highest-risk areas and then concentrates compliance initiatives there, according to Scott Moritz, one of Daylight’s executive directors.

Today’s lean initiatives will have to prove their effectiveness in blunting temptations to fudge numbers, abuse power, or cheat in pressure-cooker work environments. Already in 2007, the ERC’s biannual business ethics survey has found that the incidence of workplace misconduct had climbed to pre-Enron levels. Results from the 2009 survey are expected later this year.