2003 National Business Ethics Survey (NBES)
The 2003 National Business Ethics Survey (NBES) asked employees in the 48 contiguous states to share their views on ethics and compliance within their organizations. The broad concept of business ethics may defy easy summary, but the survey questions in this third NBES report are specific and focused. They combine to yield answers on matters relating to how employees distinguish right from wrong behavior in their work, the availability of resources to aid in making appropriate decisions, and the general practice of values like honesty and respect in the workplace. More specifically, the survey of 1500 participants, focused on a number of key areas including:
- Ethics practices of executives, supervisors and coworkers
- Prevalence of formal ethics programs
- Pressures to compromise ethics standards
- Misconduct at work and the influences on reporting it
- Frequency with which certain ethical values are practiced
- Accountability for ethics violations
Context is critical in any survey. To make better sense of survey findings and trends in business ethics, we look first to the larger business environment. The years between the 2000 and 2003 Surveys have brought the end of the dot.com boom, a sizable downturn in the economy and, beginning with Enron, a series of well-publicized scandals among major corporations and non-profit organizations. New and emerging legislation and regulations, including the Sarbanes-Oxley Act of 2002, SEC Regulations and New York Stock Exchange rules are placing additional emphasis on executive conduct and organizational standards and practices. These events are of course related and together form a backdrop for the findings we present.
Given these developments, we might expect employees in 2003 to be more aware of business ethics than in previous survey years. We might also expect business leaders to focus more attention on issues and concerns relating to ethics. But to what effect? Are negative events in business simply mirrored in how employees view the conduct of their leaders and assess their organizations? Or can corporate scandals in particular have the opposite effect - providing both the impetus for change and making employees' own organizations look better by comparison?
The answers from the Survey are clear and compelling. Recent negative events have not resulted in employees' viewing business ethics in their own organizations more negatively. Though major vulnerabilities and challenges remain, findings from the 2003 NBES are surprisingly hopeful.
Perceptions of ethics are generally positive. Employees view ethics in their organizations more positively in 2003, as compared with 2000. The NBES survey data indicate that:
- Employee perceptions that top management talks about the importance of ethics, keeps promises and models ethical behavior have all increased since 2000. For example, 82% of employees in 2003 said that top management in their organizations keeps promises and commitments, as compared with 77% in 2000. In addition, the increases between 2000 and 2003 tend to be more substantial in larger (over 500 employees) versus smaller organizations.
- Two key indicators of ethics-related problems in the workplace - (1) observed misconduct and (2) pressures to compromise ethics standards - have declined since the 2000 Survey. Observed misconduct dropped from 31% in 2000 to 22% in 2003, while pressure fell from 13% to 10% during this time period.
- Declines in observed misconduct and pressure have occurred primarily among non-management employees.
- Reporting of misconduct by employees has increased steadily in the Surveys conducted in 1994 (48%), 2000 (57%) and 2003 (65%).
- Employees indicate that values such as honesty and respect are practiced more frequently in their organizations in 2003.
Vulnerabilities and challenges remain. Some employee groups and organizations may be more at risk for ethics-related problems. Potential risks and challenges are indicated by findings that:
- Nearly a third of respondents say their coworkers condone questionable ethics practices by showing respect for those who achieve success using them.
- The types of misconduct most frequently observed in 2003 include: abusive or intimidating behavior (21%); misreporting of hours worked (20%) lying (19%); and withholding needed information (18%).
- Employees in transitioning organizations (undergoing mergers, acquisitions or restructurings) observe misconduct and feel pressure at rates that are nearly double those in more stable organizations.
- Compared with other employees, younger managers (under age 30) with low tenure in their organizations (less than 3 years) are twice as likely to feel pressure to compromise ethics standards (21% versus 10%).
- Despite an overall increase in reporting of misconduct, nearly half of all non-management employees (44%) still do not report the misconduct they observe. The top two reasons given for not reporting misconduct are: (1) a belief that no corrective action will be taken and (2) fear that the report will not be kept confidential.
- Younger employees with low tenure are among the least likely to report misconduct (43% as compared with 69% for all other employees). They are also among the most likely to feel that management and coworkers will view them negatively if they report.
- Less than three in five employees (58%) who report misconduct are satisfied with the response of their organizations.
- In many areas, views of ethics remain "rosier at the top." For example, senior and middle managers have less fear of reporting misconduct and are more satisfied with the response of their organizations. They also feel that honesty and respect are practiced more frequently than do lower level employees.
Ethics programs make a difference. The NBES asks respondents about four elements of formal ethics programs: (1) written standards of conduct, (2) ethics training, (3) ethics advice lines/offices and (4) systems for anonymous reporting of misconduct. We find that selected outcomes are related to the presence of these four program elements in organizations. Specifically, survey findings indicate that:
- The presence of ethics program elements is associated with increased reporting of misconduct by employees. Specifically, employees are most likely to report in organizations with all four program elements in place (78%). Employee reporting declines steadily in organizations with fewer program elements such as: written standards plus (67%), written standards only (52%) or none (39%).
- Ethics programs are associated with higher perceptions that employees are held accountable for ethics violations.
- In larger organizations (over 500 employees), ethics programs are associated with lower pressures on employees to compromise company standards of business conduct.
Actions count. Misconduct, pressure, reporting and other outcomes are strongly related to the actions of top management, supervisors and coworkers. Survey findings indicate that:
- Employees who feel that top management acts ethically in four areas (talks about the importance of ethics, informs employees, keeps promises, and models ethical behavior), observe far less misconduct (15%) than those who feel top management only talks about ethics or exhibits none of these actions (56%). Findings for pressure, accountability and satisfaction are similar.
- When employees feel that their supervisors and coworkers act ethically, the relationships to observed misconduct, pressure and related outcomes is similar to that for top management.
Size matters. There are important relationships between an organization's size and how its employees view ethics. Survey findings indicate that:
- Smaller organizations (less than 500 employees) are less likely to have key elements of ethics programs in place than larger ones. For example, 41% of employees in smaller organizations say ethics training is provided, as compared with 67% in larger organizations. Similarly, 77% of employees in larger organizations say that mechanisms to report misconduct anonymously are available, versus 47% in smaller organizations.
- Employee perceptions of ethics in smaller and larger organizations converged in 2003. This finding contrasts with the 2000 survey findings, which showed employees in smaller organizations generally holding more positive views of ethics. The convergence is due primarily to more positive ethics trends in larger organizations between 2000 and 2003.
As executives are increasingly called upon to "certify" the integrity of their organizations, ethical business leaders may have greater concern that the actions of one or more employees could eventually compromise their companies. Certainly, there is evidence in the 2003 NBES that concerns are warranted: views of ethics are still "rosier at the top," while pressures to compromise standards and fears of reporting misconduct are greater among particular groups of employees. Important challenges also remain in a variety of related areas for business leaders, their organizations and their employees.
But as a snapshot of business ethics in 2003, the NBES findings and trends are also positive and hopeful. Where leaders, supervisors and coworkers are talking about ethics and setting the right example, employees have taken notice. Where systems are in place to help make ethics a priority, employees are responding. In both cases, organizations appear to benefit. And where some corporations have recently failed due to ethical violations, their negative examples may help others to make better choices. As difficult as it may be, this is often how people learn and organizations improve.
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