The FCPA Guidance issued by the Justice Department and the SEC says it best – “The truest measure of an effective compliance program is how it responds to misconduct.” 

These are prophetic words.  Many organizations, however, cannot pass this basic test.  Indeed, if we look at the Ethics and Compliance Initiative’s 2021 Global Business Ethics Survey (GBES), the conclusion is inescapable: organizations’ ethical cultures are rapidly declining in the midst of retaliation against employees who report concerns. 

Ethical organizations depend on a speak up culture to identify weaknesses and uncover misconduct that threatens an organization.  If retaliation is the rule rather than the exception, management and employee trust deteriorates and any attempt to instill a shared commitment to integrity will be undermined. 

The corporate misconduct landscape is littered with examples of organizations that have suffered major scandals, poor performance, government enforcement actions and poor financial performance because of a corporate culture that embraced wrongdoing as a way of doing business.  It is not worth repeating these examples – the hall of fame of misconduct is well known and often cited.

ECI’s headline for this trend – Retaliation Rates have Skyrocketed.  While everyone understands that retaliation can occur overtly or in subtle forms, ethics and compliance professionals find it difficult to uncover and prove with credible evidence.  A commitment to preventing retaliation means robust communications from senior leadership that instances of retaliation will be severely punished and the necessary follow through: investigation of alleged instances with appropriate discipline, when warranted.

ECI has been tracking employee perceptions of retaliation for reporting misconduct since 2007.  In 2013, the survey rate of retaliation was 22 percent.  Four years later in 2017, the rate jumped to 44 percent.  In 2020, the rate of retaliation jumped to 79 percent!!

Organizations that fail to address this problem will suffer real and significant harm to their culture.  Employees will refrain from speaking up and dangers will increase.

ECI’s 2021 GBES found that retaliation rates were driven by top management and middle managers.  Retaliation against top managers and middle management increased from 2013 to 2020 by 62 and 67 percentage points, respectively.  Non-management employees retaliation rate increased by 24 percentage points.

The United States trends were also reflected in global results as well – in 2020, the global median for retaliation was 61 percent, a huge increase from 2015, which was 40 percent and 2019, which was 33 percent.  The largest increases in retaliation rates were in Brazil, China, France, Germany, and Spain.  India reported its highest rate — 90 percent.

Ethics and compliance professionals have to respond to these result and do so with steady commitment.  This continuing trend is a warning sign – if red flag if you will – that needs to be presented to the organization’s board and senior management. This project has to be identified as a high-priority.  Resting on old findings and surveys to ignore this trend would be a wrong decision.

In response, organizations’ need to develop a tailored response to this potential risk.  A culture survey, beyond the standard annual or bi-annual Human Resource survey – should be conducted.  Focus groups should be held across the organization to seek information on corporate culture to determine among other things, employee perception of retaliation.

Once assessed, an action plan to address the issues has to be implemented.  Top management has to commit time and attention.  Expectations have to be established and accountability is critical.  Middle managers have to be evaluated and held accountable for any violations of an organization’s anti-retaliation initiative.

Employees need to hear this from their own supervisors, as well as top management.  Ethics and compliance officers have to administer this initiative and follow up with allocation of resources need to communicate the message, investigate allegations of retaliation, and, if substantiated, impose severe discipline, up to and including termination of employees how violate this policy.

Unless this commitment is made, steps taken and results publicized, feel good statements of “doing the right thing,” and “culture is everything, “ will only ring hollow in the organization’s vapor of words unattached to any tangible action.