Based on its 2020 Global Business Ethics Survey, the Ethics & Compliance Initiative (ECI) found the highest percentages ever for reporting misconduct, an encouraging sign, but also a 20-year high for employee pressure to bend the rules in the United States and a record for retaliation against those who reported misconduct, both concerning developments.
Only about one-fifth of U.S. employees (21%) said that they’re in a workplace with a strong ethical culture, the same percentage as 2017. More than one-half (55%) of senior management respondents said that they work in an organization with an effective ethics and compliance program, while fewer than one-fourth (23%) of nonmanagement employees said the same, an eyebrow-raising disconnect.
“When we conducted this survey in August and September 2020, people were full-on into remote work given the COVID crisis, and we asked questions about their work lives now vs. their work lives prior to this,” said Patricia Harned, CEO of ECI. “Tied to the COVID crisis, in the past year we’ve seen so many companies laying off staff to conserve revenues, so more people felt pressure [to act unethically] to keep their job,” she said.
PRESSURE TO BEND THE RULES
While the rate of observed misconduct that ECI reported has remained relatively steady over the past 20 years, the correlation between the increase in employee pressure to act unethically and observed misconduct continues to surge upward, both globally and in the U.S.
In 2020, employee pressure to violate their organization’s ethics standards was at the highest it’s been in the U.S. since 2000, and it more than doubled since 2017, which ECI attributed to the significant organizational changes caused by the COVID-19 pandemic.
MORE REPORTING, MORE RETALIATION
ECI’s research has shown that when there’s increased pressure, the rate of observed misconduct also increases. This pattern held for 2020, although the rate of observed misconduct in the U.S. increased only slightly since 2017 and remains steady in relation to the 20-year trend.
Employees who observed misconduct in 2020 were more likely to report their observation than they were in 2017—up to 86% from 69%, the continuation of a positive trend.
Respondents’ perceptions of retaliation after reporting misconduct hit a record high. In the U.S., rates of retaliation against whistleblowers have more than tripled since 2013 and nearly doubled since 2017; globally, they’ve almost doubled since 2019.
“The more a company does to increase reporting internally, the more it’s likely to see retaliation; there’s a direct connection, and that’s discouraging,” Harned said. “The more people say ‘I tried to report a problem, but I experienced harm for it,’ it encourages other employees to stay silent because they witness the retaliation,” she said. “Best practices for fighting retaliation are to communicate with employees often that retaliation is considered an act of misconduct akin to financial fraud, there will be consequences for misconduct, and people who come forward won’t experience harm.”
GLOBAL ETHICS TRENDS
For the most part, global ethics trends in 2020 ran parallel to those of the U.S., according to ECI. The most promising news is that reporting is nearing its apex since 2015. On the other hand, pressure to compromise ethical standards and rates of retaliation against whistle- blowers are also at their highest points since 2015. Worldwide in 2020, observed misconduct in the workplace was at approximately the same level it was in 2015.
The percentage of respondents at for-profit organizations in the U.S. who reported observing misconduct, from misuse of customer data to lying to customers, rose from 47% in 2017 to 49% in 2020. Comparing that to ECI’s global 2020 data, which includes respondents from all sectors, France (25%), the United Kingdom (23%), and Germany (20%) all came in well below the U.S. percentage. Other countries included China at 46%, Brazil at 40%, India at 39%, Russia at 34%, Mexico at 33%, and Spain at 27%.
Employees in China were the most likely to say that they experienced pressure to cut corners or bend the rules (53%), while employees in Russia were the least likely to say so (16%). Rates of observed misconduct are highest in China (46%) and lowest in Germany (20%), according to ECI.
Employees in India were most likely to report the misconduct they observed (97%), and employees in Russia were least likely to do so (64%). Rates of respondents saying they’ve experienced retaliation are highest in India (90%) and lowest in Russia (41%), according to ECI.
“In 2020, 49% of people said they saw something that constitutes fraud, waste, and abuse, which is higher than we’ve seen in the past,” Harned said. “There were striking differences at the country level, in particular the people who feel pressure to cut corners to do their job.
“When an organization is undergoing significant transition, such as restructuring, downsizing, M&A [mergers and acquisitions], and significant leadership changes, that’s tied to increases in misconduct and people feeling like they have to cut corners to keep their jobs,” she said.
“Right now, every person on the planet is undergoing a significant transition—most businesses will be in transition until the pandemic is over, so C-suite leaders need to be aware that their organization is at high risk of misconduct and noncompliance, but strong controls are effective.
“In finance, it’s easy to think that culture and ethics are compliance’s job, but CFOs and other finance leaders have to take responsibility for creating a strong culture of compliance and ethics, because it’s a reflection of their actions and steps taken to hold employees accountable to the standards of their organization.”
IMA ETHICS HELPLINE
For clarification of how the IMA Statement of Ethical Professional Practice applies to your ethical dilemma, contact the IMA Ethics Helpline.
In the U.S. or Canada, dial (800) 245-1383. In other countries, dial the AT&T USA Direct Access Number from www.usa.att.com/traveler/index.jsp, then the above number.
The IMA Helpline is designed to provide clarification of provisions in the IMA Statement of Ethical Professional Practice, which contains suggestions on how to resolve ethical conflicts. The helpline cannot be considered a hotline to report specific suspected ethical violations.