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ECI’s New Business Ethics Survey Confirms Misconduct Rates Declining — But Retaliation Rates Increasing

The Ethics and Compliance Initiative recently released the results of its global business ethics survey.  (Download Copy Here).  The last survey was conducted in 2017 and ECI’s survey provides important and valuable insights into corporate metrics and compliance, focusing on misconduct issues.

The survey was conducted in late 2016 and 2017.  Thirteen countries were selected: Brazil, China, France, Germany, India, Italy, Japan, Mexico, Russia, South Korea, Spain, the United Kingdom and the United States.  Five additional countries were added in 2017.

The report outlines several important trends – rates of observed misconduct have declined since 2013.  Sixty-nine percent of those who observed misconduct ended up reporting the misconduct.  This result was very positive news.   However, this positive news is tempered by several other findings in the report.

One in 5 employees indicated that their company has a strong ethical culture.  Approximately 40 percent of employees defined their company’s ethical culture as weak or leaning weak.  These culture findings are not surprising but still underwhelming.  With the new-found focus on corporate culture, and the aggressive enforcement environment, I would have expected this result to be higher.

Approximately 16 percent of employees reported pressure to cut corners and compromise ethical standards.   Approximately 33 percent of employees observed misconduct. The rates of observed misconduct and pressure to compromise standards was highest in Brazil, India and Russia.

Brazil reported pressure and observed misconduct rates of 47 and 43 percent, respectively; India reported pressure and observed misconduct rates of 40 and 40 percent, respectively; and Russia reported pressure and observed misconduct rates of 33 and 45 percent, respectively.

Most troubling from the report was the increase in the percentage of employees reporting retaliation – 44 percent, an increase from the 22 percent rate of retaliation reported in the 2013 survey.  Most employees who experienced retaliation reported that it occurred within three weeks of reporting the concern.  The rise in reporting and retaliation rates is an interesting result and may indicate that employee reporting may decline in the short-term.

Interestingly, employees at companies that identified themselves as a supplier, that is, providing goods and services to other companies (not consumers) had higher rates of observed misconduct and experienced more retaliation.  Similarly, multinational corporations reported higher rates of observed misconduct and retaliation.

There is no question that pressure rates can be a leading indicator of future misconduct.  A company that instills a culture of cutting corners is likely to experience a significant increase is misconduct rates.

The private sector reported that 23 percent of top managers, and 32 percent of middle managers were involved in bribery.  The reports of bribery and corruption misconduct were highest in India, China, Germany and South Korea.  Almost one in five employees in the private sector reported observing bribery misconduct.

Another interesting finding by ECI was the fact that organizations undergoing significant changes experienced more compliance shortfalls and risks to the organization increased.  This is not surprising since corporate leadership and managers at companies undergoing change are likely to focus on the implementation of changes and pay less attention to ethics and compliance issues.

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