Ethics in the Workplace Improved During the Recession, National Employee Survey Shows

November 18, 2009

Like the Enron Era, Ethical Conduct Improves Temporarily During Periods of Economic Stress

Arlington, VA – Do Americans in the workplace behave better in a down economy? Apparently yes, according to the Ethics Resource Center, which today announced the results of its sixth National Business Ethics Survey® (NBES).

Ethics in the Recession, is available at www.ethics.org/nbes

Seventy-eight percent of U.S. employees say they or their colleagues experienced the impact of the recession. Yet key measures of ethical behavior – the amount of misconduct observed, the willingness to report misdeeds, the strength of ethical cultures and the pressure to cut corners – all improved since ERC’s last survey in 2007, shortly before the recession started. Only retaliation against those who reported misconduct ticked upward by 3 percentage points.

  • Fewer employees said they had witnessed misconduct on the job; the measure fell from 56 percent in 2007 to 49 percent in 2009
  • More employees said they had reported misconduct when they observed it ; 63 percent in 2009, up from 58 percent in 2007
  • ERC’s measures of ethical culture in the workplace increased from 53 percent in 2007 to 62 percent this year – a positive sign
  • And overall, perceived pressure to commit an ethics violation – to cut corners, or worse – declined from 10 percent two years ago to 8 percent
  • Only retaliation against those who reported misconduct appeared to increase – a negative development.

NBES data show, however, that the improvements tend to be temporary and that management needs to stay alert as the economy gradually improves and businesses and other organizations return to business as usual.

NBES detected a similar pattern from 2000 to 2003, when the economy was rocked by the bursting of the dot com bubble, the events of 9/11 and corporate scandals including Enron, WorldCom, Tyco and Adelphia. ERC’s ethics metrics all improved during that period, only to fall back until the onset of the current recession in December 2007.

Former Rep. Michael Oxley, co-sponsor of the Sarbanes-Oxley Act of 2002 and chairman of the ERC board of directors, said, “Business ethics is one of the pillars of a strong economy and in today’s environment, it is more important than ever that our nation’s business leaders set and meet the highest standards of ethical conduct. This survey provides an important measure of the strengths and weaknesses of our culture of business ethics.”

Sarbanes-Oxley established tougher accountability standards and requirements for public companies in the wake of the Enron scandal.

“The anxieties of a shrinking economy did not translate, in general, into a free fall in ethical behavior. Far from it,” said ERC President Patricia J. Harned, Ph.D. “Yet our research suggests that the improvements in ethical conduct will be temporary.  The focus needs to stay on ethical culture and the tone at the top, starting with an organization’s directors and most senior executives.”  

To gauge fallout from the recession, the 2009 NBES also posed questions about transparency and accountability in the workplace. A strong majority of employees – 71 percent – considered their senior leaders to be open and informative with employees in their organizations. Eighty percent considered their organizations to hold employees accountable for wrongdoing. The results also show a strong connection between the strength of an organization’s ethical culture and positive employee attitudes about the appropriateness of the CEO’s compensation. In a weak ethical culture, 34 percent of employees said that their CEO was motivated to take excessive risks to achieve business goals. 

“Employees are highly influenced by their perceptions of senior executives,” Harned said. “If they believe risk is rewarded at the top, more risk may be taken throughout the organization.”

Reporting Increased

About 7 percent of workers said that they had observed instances of sexual harassment (down from 10 percent in 2007) but there was a 2 percentage point increase, to 51 percent, in the number of people who reported it to superiors. Some 14 percent saw discrimination in the workplace, similar to 13 percent in 2007, but there was a 9 point gain, to 44 percent, in the number of people who reported it.   Improper hiring practices remained the same from the previous year’s 10 percent but about 37 percent of those people reported it, a 4 percentage point increase over the previous survey. Observations of stealing and theft, however, were at 9 percent, down 2 points from 2007 and reporting those incidents was down by 2 points, to 62 percent.

Retaliation

Among those who said they witnessed and reported unethical behavior this year, 15 percent said they experienced some form of retaliation, a 3 percentage point increase over 2007. Retaliation ranged from physical abuse (4 percent) to verbal abuse by supervisors (55 percent) or peers (42 percent). Others said they were relocated or re-assigned, passed over for promotion and/or almost fired.

About ERC

The Ethics Resource Center (ERC) is a private, nonprofit organization devoted to independent research and the advancement of high ethical standards and practices in public and private institutions. For 87 years ERC has been a resource for institutions committed to a strong ethical culture. ERC’s expertise also informs the public dialogue on ethics and ethical behavior. ERC researchers analyze current and emerging issues and produce new ideas and benchmarks that matter – for the public trust. For more information, visit www.ethics.org or call (703) 401-6339.