Business ethics back in the dumps

Six years after a spate of high-profile corporate scandals shocked America, little change is visible in ethics practices nationwide, a recent report says.

Ethics practices in most workplaces have slipped back to levels seen in the year 2000, says the Ethics Resource Center’s 2007 National Business Ethics Survey.

“Despite new regulation and significant efforts to reduce misconduct and increase reporting when it does occur, the ethics risk landscape in American business is as treacherous as it was before implementation of the Sarbanes-Oxley Act of 2002,” Patricia Harned, president of the Center, says in a statement.

The Sarbanes-Oxley Act, which enhanced standards for publicly held companies, sought to rectify perceived leniency in ethics regulations that led to corporate and accounting scandals at Enron, Tyco International, and WorldCom, among others.

The center’s survey, conducted biennially since 1994, is based on interviews with 2,000 employees at U.S. public and private companies of varying sizes.

Over half the employees surveyed had observed violations in the past year of their companies’ ethical standards or policies, or even the law.

The most severe ethical breaches included conflicts of interest, abusive behavior and lying, the survey says.

Two out of five employees who witnessed such misconduct did not file a report.

Of those who did not report observed ethical or legal violations, more than half cited perceived futility, indicating that they did not believe their report would lead to corrective action, and more than a third feared retaliation.

Those who did report misconduct preferred to inform someone they know rather than an anonymous hotline. Company hotlines account for only 3 percent of reports of ethical violations, the study says.

“The good news is that the rate of misconduct is cut by three-fourths at companies with strong ethical cultures, and reporting is doubled at companies with comprehensive business ethics programs,” says Harned.

Yet fewer than 4 in 10 respondents were aware of business ethics and compliance programs at their companies, and only about one in four companies have comprehensive programs, Harned says.

The Ethics Resource Center is an Arlington, Va.-based nonprofit that promotes the advancement of high ethical standards and practices in public and private institutions.

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