Column: The ROI on Ethical Culture
By Patricia J. Harned, Ph.D.
President, ERC
Business has taken a pounding lately in the ethics arena, especially in the area of sub-prime mortgages and the fancy securities based on them. But don’t count Washington out. Government entities and nonprofit organizations – two staples of the nation’s capital – are not so far behind the corporate world when it comes to ethical behavior, or the lack of it, in the workplace.
ERC now issues its annual surveys of workplace ethics in three separate and distinct reports – business, government and nonprofits – and our 2007 National Nonprofit Ethics Survey issued last month highlighted good and bad news about the state of ethical culture among dozens of foundations and associations.
As if on cue, news broke that the head of the Smithsonian Institution’s Latino Center in Washington, D.C. had resigned her $200,000-a-year post after an internal investigation found she had violated several ethics rules, and that Smithsonian officials had glossed over the investigation when they announced her departure.
She denied wrongdoing, but, according to an editorial in The Washington Post, the Smithsonian’s inspector general “concluded she violated 14 ethical and conflict-of-interest policies. There were troubling allegations of lavish travel, expense account abuse and soliciting gifts.”
This is the same Smithsonian Institution whose former chief resigned last year under fire for allegedly lavish spending.
The Smithsonian’s latest embarrassment didn’t get a free ride in the press. It had to compete for headlines with the outgoing HUD secretary, who has resigned while under investigation for alleged cronyism, and an Air Force general who allegedly steered a $50 million Pentagon contract to a former colleague.
At ERC, we don’t see these things as cause for cynicism so much as further proof that instilling an ethical culture in an institution is always a wise move, from top to bottom, and that positive change almost always leads to positive and beneficial results in bringing about more ethical behavior. Our latest national survey on nonprofits bears this out.
We found troubling trends among our nonprofit colleagues in 2007. Violations of the law or internal standards were up, financial fraud was as great as among business and government, and there was a lot of room for improvement in governance because many boards don’t take advantage of their influence to set clear ethics standards.
On the whole, however, nonprofits exhibited stronger ethical cultures and their employees’ values more often aligned with the missions and values of the organization. Instances of retaliation for reporting misconduct were much lower. And best of all, levels of misconduct dropped to nearly zero percent where ethical programs and cultures were in place. In those cases, reporting of misconduct – a key sign of an organization’s ethical health – was at 100 percent.
Overall, however, the high standards of U.S. nonprofits appear to be eroding. It is disappointing to see a prestigious institution like the Smithsonian become a poster child for misbehavior. But it is not alone. In our survey, conflicts of interest were the most-observed misconduct among nonprofits nationwide.
In the nonprofit world, as in business and government, there’s plenty of room for improvement.