Workers say honesty is best company policy

Nine in 10 employees say they value integrity as much as income. Will this lead to a new US bottom line

Despite an image popularized in films and on TV of corporations as seething caldrons of impropriety and greed, ethics in business may actually be on the rise.

Employee expectations for their company's integrity is high. A vast majority Americans say they want to work for a company whose honesty they respect, even if it interferes with the bottom line.

"There has been major progress," says Michael Daigneault, president of the Ethics Resource Center (ERC) in Washington, which conducted a comprehensive survey released this week. "US businesses are paying increasing attention to workplace ethics. And for employees, ethics rule."

Some of the major findings:

*Nine out of 10 workers polled say they value integrity as much as income, while the number who feel pressured to do the wrong thing has been more than halved since 1994.

*The number of employees reporting that their companies have a written code of ethics increased from 6 in 10 to almost 8 in 10 since the last survey in 1994.

*The number of employees who say their companies provide ethics training rose from 33 percent in 1994 to 67 percent in 2000.

But as is so often the case, intent and action don't always mesh. About 1 in 3 of the 1,500 employees surveyed also said they observed misconduct at work in the past year, and more than 2 in 5 of those did not report it. They feared being labeled a snitch or a troublemaker. And many of those who dialed so-called "ethics 800 numbers" were dissatisfied with the company's response. Another study released this week by KPMG professional services found that the number of employees witnessing wrongdoing at work was as high as 7 in 10.

Workplace ethics, which covers everything from bribing a foreign official to e-mailing a mistress, is inherently difficult to quantify. For that reason, Mr. Daigneault and his fellow researchers at ERC are circumspect when it comes to linking the growth of ethics efforts with actual results and declaring victory in the war on foul play.

But there is no denying the flowering of ethics in corporate consciousness. The Conference Board estimates US firms have invested more than $1 billion in ethics programs in the past decade. The Ethics Officers Association has grown from 60 members in 1991 to 700 members today.

Patrick Gnazzo, vice president for business practices at United Technologies Corp., has little doubt that ethics programs are proving successful. "Yes, ethics in business are getting better - for one primary reason. When you put in compliance programs because the law forces you to ... part of those programs will be controls on the system. If you manage those controls well, the amount of dollars that can be used for slush funds is much more difficult to get through the system."

Experts in the field of corporate ethics are virtually unanimous in citing implementation of Federal Sentencing Guidelines in 1987 as the catalyst for, if not the birth of, compliance and ethics programs in corporate America. Driven by Congress and imposed by federal courts, the sentencing guidelines replaced a largely discretionary punitive system.

A judge in a criminal trial must examine seven criteria - including the presence of a compliance officer, employee legal training, and an auditing system - before sentencing a corporation. If a company makes a good-faith attempt at implementing the criteria, judgments can be reduced to 5 percent of the maximum penalty. Conversely, a lack of compliance can result in a quadrupling of the penalty. Most large corporations moved quickly to install compliance programs.

Today, the corporate ethics movement, such as it is, appears to be in transition from a compliance approach, which focused on rules and regulations, to a greater focus on values and integrity.

Daigneault says the survey finds a very strong relationship between employees' perception of the presence of corporate values - such as honesty - and job satisfaction, to the point where workplace ethics may be a determinant in whether an employee stays or seeks work elsewhere. "In a very tight labor market, this has pretty strong bottom line implications."

Indeed, the KPMG survey of 2,390 workers found that almost 8 in 10 employees who believed management would endorse improper conduct said they would not recommend their companies to recruits.

Media saturation in the 1990s is also credited with spiking interest in workplace ethics programs. Lapses in corporate integrity are now more apt to be broadcast on a dozen channels before dinner and linger as a story for weeks. Observers say two cases had a particularly sobering effect on firms. Sears's alleged widespread overbilling on automotive repairs in California and Prudential's selling of suspect policies to low-income residents in the South resulted in not only barrels of negative ink, but hammered the companies' stocks as well.

Other external pressures can also alter the ethical outlook at companies. "The consuming public is holding businesses to a higher standard," says Laura Hartman, assistant professor of business ethics at DePaul University in Chicago. "If you demand products that are free of sweatshop labor ... the tendency in organizations is also to turn around and make sure that within their own organizations they are also treating people right."

Some activists would argue that companies that use sweatshop labor or show a disregard for the environment are by definition unethical, no matter what standards the firms may have posted at corporate headquarters. And experts caution against reading too much into the growth of corporate ethics policies alone. Without management follow-up, they say, an empty program can actually increase employee cynicism.

"For any company that puts in an ethics program, the biggest challenge is to institutionalize it," says Mr. Gnazzo. "Otherwise, a change in management could cause it to wither on the vine."

Ms. Hartman sees globalization as bringing with it a new set of ethical challenges - including cultural clashes between different systems of values and global labor standards. In the high-tech arena, she see privacy as a key corporate challenge.

"When you get an industry that is facing issues that the law has not yet given us answers on, you are relying on people's moral judgment - or on what they anticipate the law will be," says Hartman. "And that's what's happening in technology."

(c) Copyright 2000. The Christian Science Publishing Society

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