Business Ethics Improves during Tough Times

Although the ERC’s 2009 National Business Ethics Survey report found that perceived retaliation against employees who reported misconduct has increased slightly since a similar survey two years earlier (from 12% to 15%), most other measures of ethical behavior improved.

According to the Society for Human Resource Management, the survey found fewer employees said they had witnessed misconduct on the job – from 56% in 2007 to 49% in 2009. In addition, most workers (63%) who observed misconduct said that they reported it – up from 58% in 2007.

The ERC’s measures of the strength of the ethical culture in the workplace increased from 53% in 2007 to 62% in 2009, and overall, employees who perceived pressure to commit an ethics violation – to cut corners, or worse – declined slightly, from 10% in the prior survey to 8% in the latest survey.

The pattern of ethics appearing to improve during tough times “has occurred before,” the ERC report notes, according to SHRM. From 2000 to 2003, another period of economic stress and corporate scandals – including the failure of Enron and Arthur Andersen and the burst of the dot-com bubble – ethics metrics improved similarly.

“A possible explanation is that during hard times, when a company’s well-being or even existence may be on the line and regulators are watching, management talks more about the importance of high standards to see the organization through the crisis,” the ERC says. “It may also be that some are less inclined to commit misconduct when management is on high alert.”

However, the survey found that a company’s tactics to combat recession negatively affected employees’ perceptions of ethics in their workplaces. The more moves the organization made – such as layoffs, pay or benefits cuts, hiring freezes, and altered work schedules – the less positive employees were  about the ethics observed. At companies that took no such steps, nearly three-fourths of the workforce reported perceiving a strong or strong-leaning ethical culture. At firms where at least one of these economic steps was taken, only 58% of workers perceived a strong ethical culture.

Similarly, employee engagement declined steadily for each such recession-related move made by an organization.

Other survey findings, according to SHRM, included:

• More than 70% of American workers polled said they believe that their business leaders are transparent about business decisions and their company’s health.
• Nearly 80% of employees said they believe that they work in a company that holds employees accountable for their conduct.
• About 62% of employees report that the compensation package for their CEO is appropriate.