Fewer are behaving badly at work, survey finds. What changed?

Observed misconduct in US workplaces is at its lowest point in almost two decades, an achievement that appears to be related to companies’ increasing investment in ethics and compliance initiatives.

Mary Cybulski/Paramount Pictures/AP
Leonardo DiCaprio plays Jordan Belfort in the 2013 film 'The Wolf of Wall Street,' a dramatized portrait of corporate bad behavior. A new report suggests that ethical conduct is improving among companies and their employees.

Observed misconduct in American workplaces is at its lowest point in almost two decades, an achievement that appears to be related to companies’ increasing investment in ethics and compliance initiatives.

A survey of about 6,400 part- and full-time workers in the for-profit sector found that 41 percent had observed misconduct in their offices last year, according to The Ethics Resource Center (ERC), a Virginia-based nonprofit that released its report this month. That’s an all-time low for the eight times the report has been conducted since 1994, down from 45 percent in 2011 and 55 percent at the highest point six years ago.

“More companies have done what they need to do,” says Patricia Harned, president of the ERC.

The report queried respondents about 26 types of misconduct, including fabricating financial data, sexual harassment, lying to employees, and bribing public officials. 

For the third year now, the decline in bad behavior continued, despite an economic rebound. That bucks a long-term trend in the survey data suggesting that when the stock market is up, so, too, are sightings of crooked practices, as companies or employees angle after even bigger rewards.

“This was very different from what we expected,” says Dr. Harned.

So, how to explain the more ethical doings, even as the economy recovers? A possible explanation is that more companies are implementing ethics and compliance programs, which monitor a company’s ethical behavior and train employees in good practices.

Some 81 percent of companies now have such programs, according to the report, up from 74 percent two years earlier.

That uptick could be attributed in part to the federal government’s promise that companies with strong ethics and compliance programs will receive some leniency if accused of wrongdoing. In 2012, in what was a landmark case for such programs, investigators declined to charge Morgan Stanley for a managing director’s criminal activities, saying the financial heavyweight had done what it could to guard against rogue employee misdeeds.

“Smart business people are starting to notice that there is a return on their investment in ethics and compliance programs,” says Tim Mazur, chief operating officer of the Ethics and Compliance Officer Association, based in Waltham, Mass.

Of course, just having an ethics and compliance program is not enough – such programs can be little more than varnish to otherwise seedy operations.

“It takes a little bit more work than an ethics and compliance program,” says David Mayer, a professor at the University of Michigan’s Ross School of Business and a researcher at EthicalSystems.Org, an online hub founded last month to help businesses bolster their ethical performance. 

That additional work includes ensuring that such programs are “embedded within an ethical culture,” says Dr. Mayer. To do so, companies must prioritize ethics, hiring and promoting ethical employees, he says.

The ethics and compliance program’s status within the organization can also weigh into the office's ethics culture.

“The positioning of the office is important,” says Lorraine D'Angelo, senior vice president for ethics and compliance at Dragados USA, a construction contractor in Costa Mesa, Calif.

Her office, founded in 2008, reports to Dragados’s president and has access to the board of directors. Not all such programs have that leverage, reporting instead to lower-level departments.

“Once you get that status, and people know it’s supported by the management, then people get the message and things start to change,” she says.

Data from the report suggest that positive revisions in office ethics cultures are both occurring and significant. Some 66 percent of workplace cultures rate as ethical, versus 60 percent in 2011, the report found. In companies with poor ethics cultures, 88 percent of workers observed unethical practices, compared with 20 percent of workers in companies with strong ethical cultures.

The report also found that, of the employees who were aware of just “some” of their company’s ethics and compliance program resources, half had seen misconduct. But of those who were aware of “all” those resources, that number dropped to 40 percent.

Still, there is room for improvement. The share of workers who actually reported the misconduct in their offices to either internal or external officers was just 63 percent, down from 65 percent in 2011.

And, in a possibly related finding, 21 percent of workers say they experienced retaliation for reporting workplace wrongdoing, barely changed from 22 percent in 2011.

In addition, some 60 percent of observed misconduct involved someone with managerial authority, a sign that it may be even harder to root out. One-quarter of the misconduct was also identified as ongoing, not just a single incident, according to the report.

”Misconduct isn’t happening as much,” says Harned, “but, where it is happening, it’s very worrisome.”

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