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The Ethics Landscape in American Business

Sustaining a Strong Ethical Work Environment

A Survey Report by the Society for Human Resource Management and the Ethics Resource Center

Project team

Project leaders: Jessica Frincke, survey research specialist, Survey Program, SHRM

Project contributors: Rielle Miller Gabriel, director, ERC Leslie Altizer, senior director, ERC Nancy R. Lockwood, M.A., SPHR, GPHR, manager, HR Content Program, SHRM Evren Esen, manager, Survey Program, SHRM Steve Williams, Ph.D., SPHR, director, Research, SHRM

External contributors: SHRM’s Corporate Social Responsibility Special Expertise Panel: Teresa A. Bailey Victoria B. Johnson, PHR Grace G. Lee, SPHR Gayle Porter, Ph.D., SPHR, GPHR

SHRM’s Ethics Special Expertise Panel: Arthur Crane SPHR, CCP Michael J. Colledge, SPHR, CCP Professor Marty Val Hill, SPHR Mary C. Miller, J.D., SPHR Andrea G. Woods, PHR

Editor: Katya Scanlan, copy editor

Design: Terry Biddle, graphic designer

Production: Bonnie Claggett, production/traffic specialist

This report is published by the Society for Human Resource Management (SHRM). All content is for informational purposes only and is not to be construed as a guaranteed outcome. The Society for Human Resource Management cannot accept responsibility for any errors or omissions or any liability resulting from the use or misuse of any such information.

© 2008 Society for Human Resource Management. All rights reserved. Printed in the United States of America.

This publication may not be reproduced, stored in a retrieval system or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the Society for Human Resource Management, 1800 Duke Street, Alexandria, VA 22314, USA.

For more information, please contact: SHRM Research Department 1800 Duke Street, Alexandria, VA 22314, USA Phone: (800) 283-7476 Fax: (703) 535-6432 Web: www.shrm.org/research

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The Ethics Landscape in American Business

contents

About This Survey Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

About the ERC’s 2007 National Workplace Ethics Surveys (NWES) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

About SHRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

About ERC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Introduction: Standards of Business Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Survey Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Organizational Ethics Standards and Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Roles of Human Resource Professionals in Organizational Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Ethical Behavior of Top Management, Supervisors and Nonmanagement Employees . . . . . . . . . . . . . . . . . . . . . . 19

Pressures to Compromise Organization’s Ethics Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Observed Misconduct on the Job . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Reporting of Ethical Misconduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

Appendix: Notes and Caveats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46

SHRM Survey Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

A Survey Report by the Society for Human Resource Management and the Ethics Resource Center

June 2008

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about this survey rePort

In 1997 and 2003, the Society for Human Resource Management (SHRM) and the Ethics Resource Center (ERC) collaborated on a business ethics survey of SHRM’s membership. In November 2007, SHRM once again partnered with the ERC to conduct another survey on the topic of ethics. Several changes were made to the 2007 survey, which incorporated a number of questions from the ERC’s 2007 National Workplace Ethics Surveys (NWES)SM. These changes were made to the survey in order to provide benchmarks for HR professionals in a number of important areas and ensure that the survey keeps pace with developments in business ethics. Questions in the survey address six key themes, which also serve to organize the presentation of findings in the report. The themes, in order of their appearance, are:

Organizational ethics standards and practices. n

Roles of human resource professionals in organizational ethics. n

Ethical behavior of top management, supervisors and nonmanagement employees. n

Pressures to compromise organization’s ethics standards. n

Observed misconduct on the job. n

Reporting of ethical misconduct. n

This report presents an analysis of the results from the SHRM/ERC 2007 Business Ethics Survey and examines differences by HR professionals’ industry, staff size and employment sector. Where applicable, this report also discusses the results from the 1997 and 2003 SHRM/ERC surveys on this topic and draws comparisons with the 2007 NWES (of employees).

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about the erc’s 2007 national WorkPlace ethics surveys (nWes)

Since 1994, the Ethics Resource Center has fielded a nationally representative poll of employees at all levels to understand how they view ethics and compliance at work. Previous reports presented aggregated findings from the business, government and nonprofit sectors; 2007 marks the first time separate sector reports have been issued. Henceforth, the findings of the National Workplace Ethics Surveys (NWES) will be presented primarily through the National Business Ethics Survey®, the National Government Ethics SurveySM and the National Nonprofit Ethics SurveySM.

The NWES research has become the national benchmark on organizational ethics. It is the country’s most rigorous measurement of trends in workplace ethics and compliance, a snapshot of current behaviors and thinking, and a guide in identifying ethics risk and measures of program effectiveness. The 2007 survey is the fifth in the series and the fourth survey that includes nonprofit data.

Over the years, ERC has polled more than 13,500 employees through the NWES, representing the U.S. workforce across all sectors. This study is the most exacting longitudinal research effort examining organizational ethics from the employee perspective. The long-term nature of the study is important because it provides context for national trends. The National Workplace research includes the only longitudinal study tracking the views of employees at all levels within organizations to reveal real-life views of what is happening within organizations and the ethics risks they face.

Across all three sectors in 2007, ERC polled a total of 3,452 employees. A report detailing business findings was released in November 2007, a similar report covering the government sector was released in January 2008, and the nonprofit sector report was released in March 2008. All three reports can be downloaded online at www.ethics.org.

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about shrm

The Society for Human Resource Management (SHRM) is the world’s largest professional association devoted to human resource management. Our mission is to serve the needs of HR professionals by providing the most current and comprehensive resources and to advance the profession by promoting HR’s essential, strategic role. Founded in 1948, SHRM represents more than 225,000 individual members in over 125 countries and has a network of more than 575 affiliated chapters in the United States, as well as offices in China and India. Visit SHRM at www.shrm.org.

about erc

Founded in 1922, the Ethics Resource Center (ERC) is America’s oldest nonprofit organization devoted to the advancement of high ethical standards and practices in public and private institutions. For more than 85 years, ERC has been a resource for public and private institutions committed to a strong ethical culture. ERC’s expertise also informs the public dialogue on ethics and ethical behavior. ERC researchers analyze current and emerging issues and produce new ideas and benchmarks that matter—for the public trust. For more information about ERC, please visit www.ethics.org.

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Introduction: Standards of Business Conduct

Ethics can be defined as a philosophy principle concerned with opinions about appropriate and inappropriate moral conduct or behavior by an individual or social group.1 Defined more broadly, corporate ethics can include legal compliance, ethical conduct and corporate social responsibility, all of which affect business sustainability. In a business environment, the rules or standards of ethical behavior govern the conduct of company officers, directors and all employees—including HR professionals. Investors, employees and communities look to businesses to act both legally and ethically. Businesses should be concerned about business ethics for a number of reasons. These include reduced financial risks and liabilities; greater consistency in applying standards and values; and enhanced reputation among organizational stakeholders.2

A number of cases involving misstated financial reports, poorly conducted financial audits and questionable executive compensation packages gave rise to the Sarbanes-Oxley Act (SOX) of 2002. Corporate scandals occurring in organizations like Enron, Arthur Andersen and WorldCom drew closer scrutiny to the importance of workplace ethics and subsequent legislation. Since SOX was intended to foster truthful communication between company officers and shareholders, the provisions of SOX also cover whistleblowing. The provision protects employees and anyone working for publicly traded companies who report a perceived ethical violation in good faith. The full text of the Act is available at www.sec.gov/about/laws/soa2002.pdf.

It is important for HR professionals to be familiar with government legislation that addresses or involves ethical conduct or requirements (e.g., SOX), as well as a number of ethical issues, such as privacy in the workplace, organizational abuse, harassment and conflicts of interest. HR professionals are also often involved in formulating ethics policies for their organizations, serving as a resource for ethics-related issues, communicating standards of conduct, conducting ethical awareness training for employees and applying corrective action.

This report further examines the role of HR professionals in organizational ethics, as well as the types of standards and practices that organizations have in place, and the behaviors of top management, supervisors and nonmanagement employees that shape ethical culture. HR professionals were also asked about the pressures that they face

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in compromising their organization’s ethics standards, types of misconduct that they have personally observed on the job and reporting of ethical misconduct.

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HR Professional SampleThe survey instrument was developed by the SHRM Survey Program and the ERC and was based on the 1997 and 2003 SHRM/ERC Business Ethics Surveys and the 2007 NWES. An internal committee of SHRM staff with HR expertise and an external committee of SHRM Special Expertise Panel members also provided invaluable insight and recommendations for the instrument. Key terms used in the survey instrument are defined in the Appendix.

In November 2007, 3,000 randomly selected SHRM members were invited to participate in a confidential survey titled “SHRM/ERC 2007 Business Ethics Survey.”3 The sample of HR professionals was randomly selected from SHRM’s membership database, which included approximately 225,000 individual members at the time the survey was conducted. Only members who had not participated in a SHRM survey or poll in the last four months were included in the sampling frame. Members who were students, located internationally or had no e-mail address on file were excluded from the sampling frame. Members were assured that their survey responses would be combined with all other responses.

An e-mail with a hyperlink to the survey was sent to the 3,000 members. Of these, 2,736 e-mails were successfully delivered to respondents, and 513 HR professionals responded, yielding a response rate of 19%. The survey was accessible for a period of three weeks, and four e-mail reminders and a fax reminder were sent to nonrespondents in an effort to increase response rates.

The sample of HR professionals was representative of the SHRM membership population, although there were some differences by organization staff size, with more HR professionals in this sample from small- and medium-staff-sized organizations and fewer from large-staff-sized organizations.

Employee SampleParticipants in the 2007 NWES were 18 years of age or older, currently employed at least 20 hours per week for their primary employer and working for an organization that employs at least two people. They were randomly selected to attain a representative national distribution, and therefore this sample is referred to as ‘Employees’ or the ‘U.S. Average (for employees)’ throughout the report.

Methodology

7

All interviews were conducted via telephone, and participants were assured that their individual responses to all survey questions would be confidential. A total of 3,452 interviews were conducted from June 25 through August 15, 2007, yielding a response rate of 18%. However, as a result of population weighting, the number of respondents (indicated by “n” in figures and tables) will vary for different questions.

Survey questions and sampling methodology were established by ERC; data collection was managed by the Opinion Research Corporation (ORC). Analysis by ERC was based upon a framework provided by the Federal Sentencing Guidelines for Organizations (FSGO), the Sarbanes-Oxley Act (SOX) of 2002 and professional experience in defining elements of formal programs, ethical culture, risk and outcomes.

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It was less common for top management to be held accountable for ethics violations and for nonmanagement employees to talk about the importance of workplace ethics compared with the other groups.

The most prevalent types of organizational ethics standards/practices, as reported by approximately three-fourths or more of HR professionals, were:

1) Discipline for employees who violate their organization’s ethics standards.

2) A formal ethics program that includes written standards of ethical workplace conduct.

3) A means for an employee to confidentially or anonymously report violations of ethics standards.

4) A written nonretaliation policy for employees who report a perceived ethical violation in good faith.

HR professionals play an important role in organizational ethics. The vast majority of HR professionals believe that their HR department is a primary resource for ethics-related issues and HR is involved in formulating ethics policies for their organization to a “moderate extent” or “large extent.” At the same time, a sizeable number of HR professionals feel that they are not truly part of the ethics infrastructure in their organizations, yet they are often called upon to remedy or assist with the situations caused by ethics violations. Despite this issue, most HR professionals feel prepared to handle situations that could lead to ethics violations.

HR professionals, in general, were in agreement that nonmanagement employees, supervisors and top management 1) support them in following their organization’s ethics standards, 2) talk about the importance of workplace ethics and doing the right thing in the work they do, 3) set a good example of ethical behavior, and 4) are held accountable if they were caught violating the organization’s ethics standards. However, according to respondents, it was less common for top management to be held accountable for ethics violations and for nonmanagement employees to talk about the importance of workplace ethics compared with the other groups.

Overall, organizations tend to reward employees for ethical behavior. Approximately four out of 10 HR professionals agreed or strongly agreed that their organization rewards employees who follow its ethics standards, while six out of 10 respondents

Key Findings

9

disagreed (responded “disagree” or “strongly disagree”) that their organization rewards employees who get good results even if they use questionable practices.

Although only two out of 10 HR professionals overall felt pressure to compromise their organization’s ethics standards, pressure from top management, supervisor and co-workers, protecting the interests of the organization and limited resources were the five leading sources of pressure.

The most common types of misconduct observed by HR professionals in their organizations during the past 12 months were abusive or intimidating behavior toward employees (excluding sexual harassment); e-mail and/or Internet abuse; misreporting actual time or hours worked; behavior that places an employee’s interest over the organization’s interests; and employees calling in sick when they were not.

More than eight out of 10 HR professionals reported their observations of misconduct to management or another appropriate person during the past 12 months. Most often, HR professionals reported ethics violations to top management and/or a supervisor. When respondents did not report ethics violations (18%), typically it was because they would have had to report it to the person involved or they did not believe that corrective action would have been taken.

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organizational ethics standards and Practices

There are six basic elements that are fundamental to a comprehensive ethics and compliance program.4 These include written standards for ethical conduct, training on ethics, provision of a mechanism for seeking ethics-related advice or information, provision of a mechanism for reporting misconduct anonymously, disciplining of employees who violate the standards of the organization or the law, and ethical behavior as part of employee’s regular performance appraisals. These elements were first encouraged by the Federal Sentencing Guidelines for Organizations (FSGO), as outlined in 1991 and 2004 by the U.S. Sentencing Commission. In addition to the guidelines in the FSGO, SOX places strict mandates on organizations. It requires high-level oversight of publicly traded company financial records as well as anonymous means to report financial violations. SOX also requires publicly traded companies to disclose if they do not have a code of ethics or conduct in place. Public registrants are required to have codes of conduct for listing on many exchanges.

As demonstrated in Figure 1, most organizations do not have a comprehensive ethics and compliance program in place. Twenty-three percent of HR professionals reported that their organizations had all six program elements, whereas only 7% indicated that their organization had not implemented (or they were not aware whether their organization had implemented) any of the program elements recommended by the FSGO.

However, most HR professionals said that their organizations had discipline for employees who violated the standards of their organizations (88%), written standards for ethical conduct (75%), a mechanism for reporting violations confidentially or anonymously (74%), and orientation or training on ethics (66%). In contrast, one-half or more of the organizations each did not have a specific mechanism for seeking ethics-related advice (50%) and did not evaluate ethical conduct as part of the employees’ regular performance appraisal (57%), according to HR professionals. Figure 2 includes the six program elements, as well as other types of ethics standards and practices that organizations have in place.

“Whether more companies are doing more and better things in guiding their ethical direction because [they believe it is] the right thing to do or in response

Survey Results

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to stockholders or legislation, it is undeniable that the trend is most positive,” says Arthur Crane, SPHR, CCP, president of Capstone Services and member of SHRM’s Ethics Special Expertise Panel. “It is a clear indication to companies and HR practitioners in companies that do not have strong ethics programs that they are in the minority and can use this data to spur movement in the right direction.”

Although Teresa A. Bailey of Caribbean Transportation Services – A FedEx Company and member of SHRM’s Corporate Social Responsibility Special Expertise Panel also finds these data to be positive, she “would be further interested to see the number of ‘complaints’ regarding ethical violations, resolutions and possible tracking to see the validity of the program administered.”

“I believe that only true integration of ethical behavior into the overall culture will ultimately take American business where it needs to go,” says Mary C. Miller, J.D., SPHR, human resources director of Acorn Media Group and member of SHRM’s Ethics Special Expertise Panel. “Like many things in this country, such endeavors take ‘political will.’ Personally, I do not believe the majority of upper management or shareholders actually want to put their money where their mouth is—as it could cost them in many ways. I do feel heartened to see that 43% have ethical behavior as part of their appraisal systems. This seems to be a logical entry point to the bigger culture in any organization. This is an area where HR professionals may be able to move the issue of ethics into the mainstream discussion at any given entity.”

Similarly, professor Marty Val Hill, SPHR, of Woodbury School of Business, Utah Valley University, and member of SHRM’s Ethics Special Expertise Panel, remarks

Figure 1 | organizational ethics standards and Practices (Program index) (hr Professionals)

50%

40%

30%

20%

10%

0%

None or don’t know to all

1 element 2 elements 3 elements 4 elements 5 elements 6 elements

(n = 464) Number of Program Elements Present in Organizations

Note: The Program Index, developed by the ERC, includes the following six program elements: written standards for ethical conduct, training on ethics, provision of a mechanism for seeking ethics-related advice or information, provision of a mechanism for reporting misconduct anonymously, disciplining of employees who violate the standards of the organization or the law, and ethical behavior as part of employee’s regular performance appraisals.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

7% 7%11%

13%17%

23% 23%

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on the importance of ethics standards/practices when it comes to ethical behavior, as well as a strong and supportive ethical culture: “The enforcement of canonized ethical standards, which are reflected in organizational codes of conduct, is just the final episode in a trilogy of needed components within a thriving ethical culture. The first piece is comprised of clearly communicated educational programs to ensure that all employees, vendors and prospective new-hire candidates understand what standards are embraced or most highly valued within the organization. The central portion of the ethical conscience of an organization is a set of well-defined operational systems that encourage the veneration of ethical principles and, more importantly, reward only ethical business achievements.”

Figure 2 | specific organizational ethics standards and Practices (hr Professionals)

Discipline for employees who violate organization’s ethics standards (n = 470)*

A formal ethics program that includes written standards of ethical workplace conduct (n = 482)*

A means for an employee to confidentially or anonymously report violations of ethics standards (n = 487)*

A written nonretaliation policy for employees who report a perceived ethical violation in good faith (e.g., policy to protect whistleblowers)

(n = 477)

Orientation or training on organization’s standards of ethical workplace conduct (n = 484)*

Organization has a mission, vision or value statement that makes reference to ethical workplace conduct (n = 429)

A specific office, telephone line, e-mail address or web site where one can get advice about workplace ethics issues (n = 480)*

An ethics officer or professional in similar role (n = 476)

Evaluation of ethical conduct as part of regular performance appraisals (n = 464)*

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

*Represents the six program elements that have been designated in the 2007 NWES to measure the extent to which organizations follow the rules recommended by the FSGO. For the purpose of the analysis, the orientation and training on ethics category includes mandatory (52%) and nonmandatory (30%) response options.Note: Data sorted in descending order by the percentage of HR professionals who answered “yes.” HR professionals who responded “don’t know” or “not applicable” were excluded from the analysis.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

43%

49%

50%

63%

66%

74%

74%

75%

88%

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Not surprisingly, most HR professionals are familiar with their organizations’ ethics standards (92% in 2003 and 91% in 2007), given their involvement in organizational ethics (see next section for more information on HR’s role). These data are depicted in Figure 3. HR professionals from publicly owned for-profit organizations were more familiar with their organizations’ ethics standards compared with HR professionals from nonprofit organizations.5 Although there are no comparable employee data from the 2007 NWES, it would be interesting to learn more about employees’ overall level of familiarity with their organizations’ ethics standards and which standards are most highly valued within their organizations.

As shown in Table 1, in general, large organizations tended to have most organizational ethics standards and practices in place. Medium organizations were more likely than small organizations to have an ethics officer or professional in a similar role and to evaluate ethical conduct as part of regular performance appraisals. Compared with small organizations, medium organizations were also more likely to have mandatory orientation or training on their standards of ethical workplace conduct and a specific mechanism for seeking ethics-related advice or information.

Nearly all of the provisions of SOX apply only to publicly traded corporations, although several state legislatures have already passed or are considering legislation containing elements of SOX to be applied to nonprofit organizations. SOX covers both insider trading and whistleblowing issues. As such, publicly owned for-profit

Figure 3 | Familiarity With organization’s ethics standards (hr Professionals)

70%

60%

50%

40%

30%

20%

10%

0%

Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree

n 2003 (n = 457, average = 4.49) n 2007 (n = 486, average = 4.34)

Note: Percentages and averages are based on a scale where 1 = “strongly disagree” and 5 = “strongly agree.” HR professionals who responded “don’t know” were excluded from the analysis. Percentages do not total to 100% due to rounding.Source: Business Ethics Survey (SHRM/ERC, 2003) and The Ethics Landscape in American Business (SHRM/ERC, 2008)

0% 1% 2% 3%

7%

32%

42%

49%

60%

6%

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organizations were more likely than any other sector to have the following ethics-related practices: mandatory orientation or training on their standards of ethical workplace conduct; a specific mechanism for seeking ethics-related advice or information; a means for an employee to confidentially or anonymously report violations of ethics standards; and a written nonretaliation policy for employees who report a perceived ethical violation in good faith. These data are reflected in Table 2.

“The data regarding publicly owned for-profit organizations are not at all surprising—this simply reflects the reality of Sarbanes-Oxley,” notes Mary C. Miller, J.D., SPHR, of Acorn Media Group. “I believe without the law, the percentage of these entities with any ethics policies and procedures would be much lower. Similarly, medium-staff-sized companies are often preparing to either go public or to be acquired by larger businesses. Any company contemplating such moves

table 1 | specific organizational ethics standards and Practices (by hr Professional organization staff size)

Overall (n = 495)

Small (1-99 Employees)

(n = 153)

Medium (100-499

Employees) (n = 184)

Large (500 and More


Differences Based on Organization Staff Size

A formal ethics program that includes written standards of ethical workplace conduct

75% 69% 74% 83% Large > small

A means for an employee to confidentially or anonymously report violations of ethics standards

74% 68% 70% 86% Large > small, medium


74% 66% 72% 85% Large > small, medium

Organization has a mission, vision or value statement that makes reference to ethical workplace conduct

63% 51% 65% 70% Large > small

Mandatory orientation or training on organization’s standards of ethical workplace conduct

52% 35% 50% 75%Medium > smallLarge > small, medium

A specific office, telephone line, e-mail address or web site where one can get advice about workplace ethics issues

50% 34% 48% 73%Medium > smallLarge > small, medium

An ethics officer or professional in similar role 49% 33% 49% 67%Medium > smallLarge > small, medium

Evaluation of ethical conduct as part of regular performance appraisals

43% 32% 46% 53%Medium > smallLarge > small

Note: Data sorted in descending order by the “overall” column. Percentages presented in the table represent HR professionals who answered “yes.” HR professionals who responded “don’t know” or “not applicable” were excluded from the analysis. Sample sizes are based on the actual number of HR professionals answering the organization staff size question; however, the percentages shown are based on the actual number of HR professionals by organization staff size who answered the question using the provided response options. Table includes only response options for which there were significant differences.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

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has, de facto, to comply with Sarbanes-Oxley even if it is not legally required to do so. Failure to be compliant throws a monkey wrench into the deal because of due diligence issues.”

table 2 | specific organizational ethics standards and Practices (by hr Professional organization sector)

Overall

(n = 495)

Publicly Owned

For-Profit Organization

(n = 121)

Privately Owned

For-Profit Organization

(n = 219)

Nonprofit Organization

(n = 79)

Government Agency (n = 49)

Differences Based on Organization Sector

Discipline for employees who violate organization’s ethics standards

88% 97% 84% 86% 89%Publicly owned for-profit organization > privately owned for-profit organization

A formal ethics program that includes written standards of ethical workplace conduct

75% 92% 65% 75% 80%

Publicly owned for-profit organization > privately owned for-profit organization, nonprofit organization

A means for an employee to confidentially or anonymously report violations of ethics standards

74% 96% 64% 72% 71%

Publicly owned for-profit organization > privately owned for-profit organization, nonprofit organization, government agency


74% 94% 64% 68% 71%


Mandatory orientation or training on organization’s standards of ethical workplace conduct

52% 80% 40% 44% 55%


A specific office, telephone line, e-mail address or web site where one can get advice about workplace ethics issues

50% 84% 36% 41% 49%


An ethics officer or professional in similar role

49% 73% 37% 46% 52%


Note: Data sorted in descending order by the “overall” column. Percentages presented in the table represent HR professionals who answered “yes.” HR professionals who responded “don’t know” or “not applicable” were excluded from the analysis. Sample sizes are based on the actual number of HR professionals answering the organization sector question; however, the percentages shown are based on the actual number of HR professionals by organization sector who answered the question using the provided response options. Table includes only response options for which there were significant differences.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

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roles oF human resource ProFessionals in organizational ethics

HR professionals, in partnership with others within the organization, such as ethics officers, serve a critical role in the oversight and/or administration of various activities related to ethics. This may involve developing an organization’s ethics policies and communications, providing training on ethics standards, and handling ethics inquiries and reports. To learn more about HR’s involvement in ethics-related activities within their organizations, HR professionals were asked to respond to a series of items (Figure 4).

As reflected in Figure 4, HR professionals have important roles and responsibilities in helping to address ethical issues within their organizations. Approximately three-fourths or more of respondents believe that their HR department is a primary resource for ethics-related issues (83%) and that HR is involved in formulating ethics policies for their organization (72%) to a “moderate extent” or “large extent.” Similarly, in 2003, about seven out of 10 HR professionals agreed or strongly agreed that their HR department was a primary ethics resource (69%) and HR professionals were involved in formulating ethics policies for their organization (71%).6

The vast majority of respondents also see the individuals responsible for administering the organization’s ethics standards as skilled or experienced in managing ethical concerns to a moderate or large extent (75%). Publicly owned for-profit organizations, compared with privately owned for-profit and nonprofit organizations, were more likely to agree with this statement. HR professionals from medium and large organizations were also more likely than those from small

Figure 4 | extent to Which hr Professionals Play a role in organizational ethics (hr Professionals)

The HR department is a primary resource for ethics-related issues in the organization (n = 488, average = 3.25)

The individuals responsible for administering the organization’s ethics standards are skilled or experienced in managing ethical concerns

(n = 487, average = 3.04)

HR professionals are involved in formulating ethics policies for the organization (n = 487, average = 3.03)

HR professionals are not part of the ethics infrastructure, but they are often tasked with remedying the situation or assisting with the situation

caused by ethics violations (n = 479, average = 2.65)

To no extent n To a small extent n To a moderate extent n To a large extent

Note: Percentages and averages are based on a scale where 1 = "to no extent" and 4 = "to a large extent."Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

3%

8%

7% 21%

19% 23% 26%

33%

32%

17%

14% 38% 45%

38%

39%

37%

17

organizations to believe that the individuals responsible for administering their organizations’ ethics standards were skilled in managing ethical concerns, which makes sense given that small organizations are working with fewer resources. The designated HR person in a small organization, for example, may handle various HR functions and have other job responsibilities outside of HR. As a result, larger organizations are more inclined than small organizations to have the available and appropriate resources to manage ethical concerns. These data are illustrated in Tables 3 and 4.

Mary C. Miller, J.D., SPHR, of Acorn Media Group, points out that “in larger organizations, ethics issues may often be given to in-house or outside counsel to either formulate policies and/or to deal with situations. As an attorney and an HR professional, I understand why this occurs, and I also believe that this can cause more problems in the long run. Attorneys are trained to think about ethics and many other issues within a very specific framework. Sometimes workplace realities are much different. I suggest that HR professionals need to get to know their various attorneys very well and work alongside to temper what often becomes a purely legalistic approach.”

As mentioned, 72% of respondents indicated that HR professionals were involved in formulating ethics polices for their organizations to a moderate or large extent. Yet, 58% of respondents believed to a moderate or large extent that HR professionals were not part of the ethics infrastructure, but were often tasked with remedying the situation or assisting with the situation caused by ethics violations. These data seem somewhat contradictory, suggesting that there is some ambivalence among HR professionals about their degree of involvement in the development of ethics policies. They may be involved in formulating the polices; however, they are less likely to be perceived as part of the infrastructure. This issue was more common among government agencies than manufacturing (durable goods) industries7 and

table 3 | average level of extent to Which hr Professionals Play a role in organizational ethics (by hr Professional organization staff size)

Overall (n = 495)

Small (1-99 Employees)

(n = 153)

Medium (100-499


Large (500 and More


Differences Based on Organization Staff Size


3.04 2.76 3.09 3.30Medium > smallLarge > small

HR professionals are not part of the ethics infrastructure, but they are often tasked with remedying the situation or assisting with the situation caused by ethics violations

2.65 2.54 2.60 2.89 Large > small

Note: Data sorted in descending order by the “overall” column. Averages are based on a scale where 1 = “to no extent,” 2 = “to a small extent,” 3 = “to a moderate extent” and 4 = “to a large extent.” Sample sizes are based on the actual number of HR professionals answering the organization staff size question; however, the averages shown are based on the actual number of HR professionals by organization staff size who answered the question using the provided response options. Table includes only response options for which there were significant differences.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

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among privately owned for-profit organizations (Table 4), as well as among large organizations compared with small organizations (Table 3).

Mary Miller sees these data as inconsistent as well as troublesome: “Ultimately, HR is about knowing and caring for the employees while simultaneously steering all those ‘human resources’ towards the business objectives. I think that HR professionals need to use these data and the inconsistencies to make the case for their inclusion in the formulation of ethical policies. This will be a challenge for some people. To be effective, an HR person must be part of these critical discussions so she or he can understand the corporate approach in order to better deal with situations that occur.”

In contrast, Gayle Porter, Ph.D., SPHR, GPHR, associate professor of management, Rutgers University, School of Business – Camden, and member of SHRM’s Corporate Social Responsibility Special Expertise Panel, took a different viewpoint on the findings related to HR and the ethics infrastructure. “I know of a number of organizations that feel it is important that the ethics infrastructure be viewed by employees as independent of any identifiable department in the organization, and if the organization can support this separation, there is some value to that. When violations do occur, the issues involved in a remedy will often center on actions that are clearly in the domain of the HR professionals. Better to call them in to handle or assist in those actions than to have the ethics staff become a second, parallel HR group. We must be careful to not adopt the idea that one either controls the total sphere of influence or is uninvolved (or worse, subjugated to those ‘others’). When the ethics infrastructure is purposely held independent of the established functional structure in the organization, there is still need for strong partners among the

table 4 | average level of extent to Which hr Professionals Play a role in organizational ethics (by hr Professional organization sector)

Overall

(n = 495)

Publicly Owned For-Profit

Organization (n = 121)

Privately Owned For-Profit



(n = 79)




3.04 3.43 2.83 2.96 3.20


HR professionals are not part of the ethics infrastructure, but they are often tasked with remedying the situation or assisting with the situation caused by ethics violations

2.65 2.77 2.58 2.54 3.06Government agency > privately owned for-profit organization

Note: Data sorted in descending order by the “overall” column. Averages are based on a scale where 1 = “to no extent,” 2 = “to a small extent,” 3 = “to a moderate extent” and 4 = “to a large extent.” Sample sizes are based on the actual number of HR professionals answering the organization sector question; however, the averages shown are based on the actual number of HR professionals by organization sector who answered the question using the provided response options. Table includes only response options for which there were significant differences.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

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management ranks across the full organization, but especially within HR, where there is the greatest expertise for handling difficult employee situations.”

Grace G. Lee, SPHR, director, Human Resources, Global Operations of IMI Control Components Inc., and member of SHRM’s Corporate Social Responsibility Special Expertise Panel, is also in favor of separating out the ethics functions—where there is an ethics group and an HR group. More specifically, “the ethics group investigates a potential issue and makes recommendation on the remedy, while the HR team implements the corrective action in partnering with the leaders and the business. This structure creates a more balanced view with more chances for objectivity. Unfortunately, part of the reason that this trend is not as pervasive is due to the cost of having a separate ethics group and HR group.”

Given that a sizeable number of HR professionals are often tasked with “cleaning up” the situations caused by the ethics violations, just how prepared are HR professionals to handle these types of situations? As shown in Figure 5, the majority of respondents (76%) felt well prepared or very well prepared to handle situations that could lead to ethics violations (of the organization’s ethics standards, company policy or the law). In general, HR professionals from large organizations were more likely to feel prepared than were those from small and medium organizations.8

ethical behavior oF toP management, suPervisors and nonmanagement emPloyees

The culture of an organization influences the ethical behavior and attitudes of employees at every level. Employees learn about the expectations, standards of

Figure 5 | Perceptions of Preparedness to handle situations that could lead to ethics violations (hr Professionals)

50%

40%

30%

20%

10%

0%

Very poorly prepared Poorly prepared Neither well prepared nor poorly prepared Well prepared Very well prepared

(n = 473, average = 3.97)

Note: Percentages and averages are based on a scale where 1 = “very poorly prepared” and 5 = “very well prepared.” Respondents who responded “don’t know” were excluded from the analysis. Percentages do not total to 100% due to rounding.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

2% 3%

18%

48%

28%

20

performance and norms of behavior through their co-workers, supervisors and upper management, in particular. Whether it is explicit or implicit, they learn about what is considered acceptable behavior and the consequences to unacceptable behavior (if any). The ERC has developed an organizational ethical culture index that looks at four elements and a combination of questions that shape ethical culture.9 To learn more about the culture and ethical behavior of top management, supervisors and nonmanagement employees, HR professionals were posed similar questions in the 2007 SHRM/ERC survey. Where possible, the HR professional data are compared with the U.S. average (for employees) (Table 5).10

Overall, there was relatively little variation in the percentage of HR professionals and employees who answered “agree” or “strongly agree” to the statements. However, compared with the U.S. average (for employees), a smaller proportion of HR professionals tended to agree with the statements. Although HR professionals

table 5 | agreement With statements about ethical behavior of top management, supervisors and nonmanagement employees

Element Question

HR Professionals (n = 495)

U.S. Average (Employees) (n = 4,462)*

AgreeStrongly

AgreeAgree

Strongly Agree

Ethical leadership: belief that leaders can be trusted

Top management supports me in following my organization’s ethics standards

42% 39% 55% 30%

Top management talks about the importance of workplace ethics and doing the right thing in the work we do

40% 39% 53% 31%

Top management sets a good example of ethical behavior 41% 35% 52% 29%

Top management would be held accountable if caught violating ethics standards

34% 43% 47% 33%

Supervisor reinforcement of ethics: individuals directly above the employee in the company hierarchy set a good example and encourage ethical behavior

My supervisor supports me in following my organization’s ethics standards

39% 47% 55% 34%

My supervisor talks about the importance of workplace ethics and doing the right thing in the work we do

40% 42% 54% 29%

My supervisor sets a good example of ethical behavior 33% 51% 51% 35%

My supervisor would be held accountable if caught violating ethics standards

33% 53% 51% 34%

Peer commitment to ethics: ethical actions of peers**

Nonmanagement employees support me in following my organization’s ethics standards

61% 20% – –

Nonmanagement employees talk about the importance of workplace ethics and doing the right thing in the work we do

46% 16% – –

Nonmanagement employees set a good example 64% 19% – –

Nonmanagement employees would be held accountable if they violate ethics standards

47% 44% – –

*The total number of completed interviews for the 2007 NWES was 3,452. However, as a result of population weighting, the n-size varies for different questions. **In the 2007 NWES, respondents were asked about the peer commitment of their “co-workers” rather than “nonmanagement employees,” thus these NWES data are not included in the above table (–).Note: Percentages are based on a scale where 1 = “strongly disagree,” 2 = “disagree,” 3 = “neither agree nor disagree,” 4 = “agree” and 5 = “strongly agree.” Respondents who responded “don’t know” or “not applicable” were excluded from the analysis. Source: The Ethics Landscape in American Business (SHRM/ERC, 2008) and National Workplace Ethics Surveys (NWES) (ERC, 2007)

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(and employees) were reporting on their own experiences, HR professionals’ responses were in sync with the general employee population.

The overall responses of HR professionals to these questions are listed in Figure 6 and summarized below.

Approximately eight out of 10 HR professionals agreed or strongly agreed that they received support from their supervisor (86%), nonmanagement employees (82%) and top management (81%) in following their organizations’ ethics standards. HR professionals from publicly owned for-profit organizations tended to perceive more support from their supervisors than did those in nonprofit organizations (Table 6).

A similar proportion of respondents were in agreement (responded “agree” or “strongly agree”) that their supervisor (82%) and top management (79%) talked about the importance of workplace ethics and doing the right thing in the work they do, whereas 62% of HR professionals agreed or strongly agreed with this statement with respect to nonmanagement employees. The data indicate that it is less common for nonmanagement employees to discuss workplace ethics with other employees, compared with supervisors and top management; however, it does not necessarily imply that this group finds workplace ethics to be unimportant. Average levels of agreement revealed that HR professionals in publicly owned for-profit organizations were more likely than those in privately owned for-profit organizations to agree that top management in their organization talked about the importance of workplace ethics and doing the right thing in the work they do (Table 6).

Figure 6 | agreement With statements about ethical behavior of top management, supervisors and nonmanagement employees (hr Professionals)

Support me in following my organization’s ethics standards

Talk about the importance of workplace ethics and doing the right thing in the work we do

Set a good example of ethical behavior

Would be held accountable if they were caught violating my organization’s ethics standards

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

(n = 495) n Top management n Supervisors n Nonmanagement employees

Note: The data in this figure represent those HR professionals who answered “agree” and “strongly agree.” Percentages are based on a scale where 1 = “strongly disagree,” 2 = “disagree,” 3 = “neither agree nor disagree,” 4 = “agree” and 5 = “strongly agree.” HR professionals who responded “don’t know” or “not applicable” were excluded from the analysis.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

77%

76%

79%

82%

81%

82%

62%

84%

83%

86%

86%

91%

22

“There is a 20 percentage point disparity between supervisory and nonsupervisory employees (82% versus 62%, respectively) with respect to talking about the importance of workplace ethics,” notes professor Marty Val Hill, SPHR, of Woodbury School of Business, Utah Valley University. “These data call for action in defining a shared vocabulary and openly discussing perceived inconsistencies between desired ethical outcomes and existing reward structures.”

Overall, three-fourths or more of HR professionals agreed or strongly agreed that their supervisor, nonmanagement employees and top management set a good example of ethical behavior (84%, 83% and 76%, respectively). HR professionals from nonprofit organizations, compared with those in publicly owned for-profit organizations, were less likely to agree that their supervisors set a good example of ethical behavior (Table 6). Given the requirements of SOX, the data regarding publicly owned for-profit organizations is consistent with what would be expected or is required by law. It is important for employees at all levels, but particularly supervisors and top management, to exemplify high ethical standards and ensure that this philosophy is supported and part of the workplace culture.

table 6 | average level of agreement With statements about ethical behavior of top management, supervisors and nonmanagement employees (by hr Professional organization sector)

Overall

(n = 495)

Publicly Owned For-Profit


Privately Owned For-Profit



(n = 79)



My supervisor supports me in following my organization’s ethics standards

4.24 4.47 4.21 4.05 4.20Publicly owned for-profit organization > nonprofit organization

Top management in my organization talks about the importance of workplace ethics and doing the right thing in the work we do

4.07 4.33 4.00 3.97 4.04

Publicly owned for-profit organization > privately owned for-profit organization

Overall, my supervisor sets a good example of ethical behavior


My supervisor would be held accountable if he or she were caught violating my organization’s ethics standards


Note: Averages are based on a scale where 1 = “strongly disagree,” 2 = “disagree,” 3 = “neither agree nor disagree,” 4 = “agree” and 5 = “strongly agree.” HR professionals who responded “don’t know” or “not applicable” were excluded from the analysis. Sample sizes are based on the actual number of HR professionals answering the organization sector question; however, the averages shown are based on the actual number of HR professionals by organization sector who answered the question using the provided response options. Table includes only response options for which there were significant differences.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

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In comparison with nonmanagement employees (91%) and supervisors (86%), HR professionals were least likely to agree (responded “agree” or “strongly agree”) that top management (77%) would be held accountable if they were caught violating their organizations’ ethics standards. This discrepancy suggests that top management may not be held to the same standards as other employees, which may be perceived by other employees as an inequity or a double-standard. Compared with HR professionals from nonprofit organizations, HR professionals from publicly owned for-profit organizations were more likely to believe that their supervisors would be held accountable (Table 6).

To look at accountability from a different angle, HR professionals were asked about the extent to which employees were held accountable for not reporting ethics violations by others (Figure 7). Overall, approximately 60% of respondents reported (responded “agree” or “strongly agree”) that employees were held accountable for not reporting such violations, while approximately 30% responded “neither agree nor disagree” to this question, suggesting that the bystander partially owns the responsibility of reporting the violation. This issue may be addressed in some organizations’ written ethics policies where accountability extends beyond the offender and includes those who are also aware of the violation.

Mary C. Miller, J.D., SPHR, of Acorn Media Group, found this section “to reflect the reality of corporate America. Sadly, of the three groups discussed, top management was least likely to be held accountable and also less likely to set a good example.” Likewise, Arthur Crane, SPHR, CCP, of Capstone Services, notes that top management scored lower than supervisors in all cases: “No doubt, were the

Figure 7 | employees held accountable for not reporting violation of ethics standards by others (hr Professionals)

50%

40%

30%

20%

10%

0%


(n = 466, average = 3.59)

Note: Percentages are based on a scale where 1 = “strongly disagree” and 5 = “strongly agree.” HR professionals who responded “don’t know” were excluded from the analysis. Percentages do not total to 100% due to rounding.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

2%

12%

18%

28%

40%

24

survey given to only top management, their own perception would significantly elevate the result for their group. Enlightened top management should willingly accept these results in order to understand why they came out as they did, what perceptions might have caused them and if they are true, in fact.”

“We seem to talk a lot about the importance of top management setting the tone, both in their talk and their behavior, for high ethical standards in the organization,” says Gayle Porter, Ph.D., SPHR/GPHR, of Rutgers University School of Business – Camden. “This is a critical component. However, my own research has shown that employees’ trust in top management increases with their trust in the more immediate managers and supervisors. It seems that when there are no extremes being communicated form the top, employees view the behavior of the immediate supervisor to be representative of what is going on at higher levels. There is a lot of cynicism today about high-ranking executives, which, I think, shows up in some of these responses. But rebuilding trust throughout the organization will take consistent effort throughout organizational levels.”

Although HR professionals, in general, were in strong agreement that nonmanagement employees, supervisors and top management do model ethical behavior, employers can maintain or improve these behaviors by making ethics programs and training a priority within their organizations by communicating their importance as well as clear standards and expectations to employees. Ethical behavior can also be encouraged through rewarding employees for following the organization’s ethics standards and making sure that employees feel safe to question the decisions of top management.

Figure 8 | organization rewards employees Who Follow its ethics standards

50%

40%

30%

20%

10%

0%


n HR professionals (n = 457, average = 3.29) n U.S. average (employees) (n = 4,370, average = 3.60)*

*The total number of completed interviews for the 2007 NWES was 3,452. However, as a result of population weighting, the n-size varies for different questions.Note: Percentages are based on a scale where 1 = “strongly disagree” and 5 = “strongly agree.” Respondents who responded “don’t know” were excluded from the analysis. Percentages do not total to 100% due to rounding.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008) and National Workplace Ethics Surveys (NWES) (ERC, 2007)

5%3%

11%

45%

14%

19%

45%

10%

30%

19%

25

As shown in Figure 8, 40% of HR professionals and 64% of employees agreed or strongly agreed that their organizations rewarded employees who followed organizational ethics standards. Of most interest, nearly one-half of HR professionals (45%) neither agreed nor disagreed with this statement, indicating greater neutrality toward this topic than the U.S. average (for employees). Since HR professionals operate from a different vantage point than the general employee population, HR may see more instances where the organization does not reward employees. Respondents were also asked whether their organizations rewared employees who got good results but used questionable practices (Figure 9). Overall, similar proportions of HR professionals (59%) and employees (63%) disagreed (responded “disagree” or “strongly disagree”) that this was the case with their organizations.

Gayle Porter, Ph.D., SPHR/GPHR, of Rutgers University School of Business – Camden, was “dismayed, though not surprised, by the 26% of employees who did not disagree [or strongly disagree] with the statement that their organization rewards good results even when obtained by questionable practices. To me, this is a clear mandate for action. Using all too familiar clichés, like ‘what gets measured gets managed’ and ‘you can’t expect A if you’re rewarding B,’ organizations need to create, implement and support performance management systems that take into consideration how results are achieved, rather than simply whether those employees ‘made their numbers’.”

Figure 9 | organization rewards employees Who get good results even if they use Questionable Practices

50%

40%

30%

20%

10%

0%




17%

13%

42%

27%

11%

5%

21%

3%

11%

50%

26

Pressures to comPromise organization’s ethics standards

According to the 2007 NWES, a strong enterprise-wide cultural approach very significantly decreases misconduct, increases the likelihood of reporting ethics violations and reduces retaliation against employees who report violations. Organizations that want to improve their enterprise-wide ethical culture should focus on the four elements mentioned previously: ethical leadership, supervisor reinforcement, peer commitment to ethics and embedded ethical values.

A small proportion of HR professionals and employees overall reported feeling pressured by others (within their organization or externally) to compromise their organization’s ethics standards, company policy or the law (19% and 11%, respectively).11 “It is interesting to note that human resource professionals feel more pressured to compromise ethics than employees do,” says Arthur Crane, SPHR, CCP, of Capstone Services. “In some ways, it is not surprising. HR is the focal point for confidential and/or sensitive issues, and HR issues are often gray and readily arguable.”

Figure 10 shows the principal causes to which HR professionals attributed the pressures to compromise their organizations’ ethics standards, based on those respondents who felt pressured to compromise ethics (19%). As can be seen, pressure from top management, supervisors or co-workers, desire to protect the interests of the organization and limited resources were the leading sources of pressure (a “little,” “some” or “great” deal of pressure). Of this small subset of HR professional respondents, 84% believed that top management was a source of pressure. Approximately seven out of 10 respondents perceived supervisors (70% of HR professionals and 70% of the U.S. average (for employees)12) and co-workers (68% of HR professionals) as sources of pressure. It is evident that peer pressure from others within the company is among the most prominent stressors to compromise ethics, but protecting the interests of the organization and working with limited resources also cause some form of pressure, as reported by more than 60% of HR professionals.

“I concur that this is true, but I also believe that if HR gains respect in one’s organization and maintains the highest level of integrity, the number of incidents in which they will be asked to make an exception or ‘bend the rules’ lessens,” says Teresa A. Bailey, of Caribbean Transportation Services – A FedEx Company.

“It is a sad reality that pressure from management levels continues to prevail within the business community,” remarks Grace G. Lee, SPHR, of IMI Control Components Inc. “I believe employees may compromise their own personal beliefs to protect their stature or feel the pressure to protect their firm. However, I have seen a significant change for the positive in the last five years, and companies and leaders now believe that change has to be exemplified from the top—to ‘walk the talk’ and to ‘practice what you preach.’ HR can help transform the company culture and drive this change process. That’s where it all starts.”

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Figure 10 | sources of Pressure to compromise organization’s ethics standards (hr Professionals)

Pressure from top management (e.g., executive level, C-suite)

Pressure from supervisor

Co-workers

Protecting the interests of the organization

Limited resources

Saving others’ jobs

Meeting performance goals

Internal competition

External competition

Political pressures

Keeping your job

Advancing your own career or financial interests

Demands from people who support or invest in the organization

Vendors, consultants or third-party administrators

Friends

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

(n = 88) Not a source of pressure n A source of little pressure n A source of some pressure n A source of a great deal of pressure

Note: Data sorted in ascending order by the percentage of HR professionals who answered “not a source of pressure.” Only respondents who indicated that they felt pressured by others to compromise their organization’s ethics standards were asked this question (19%). Percentages are based on a scale where 1 = “not a source of pressure” and 4 = “a source of great deal of pressure.” HR professionals who responded “don’t know” were excluded from the analysis.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

37% 19% 26% 19%

39% 18% 29% 14%

42% 21% 28% 9%

47% 22% 22% 9%

48% 23% 20% 9%

33% 33% 28% 7%

16% 15% 37% 32%

30% 22% 29% 19%

53% 15% 27% 5%

58% 14% 20% 8%

59% 14% 12% 15%

62% 18% 10% 9%

75% 11% 7% 7%

77% 11% 11% 1%

79% 14% 7% 0%

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observed misconduct on the job

Pressures to compromise organizational ethics standards and observations of misconduct in the workplace are central areas of concerns for organizations. Trends suggesting increases among employees in either of these areas often indicate deeper organizational problems and potential risks.13 “Misconduct is more common in negative environments,” says Leslie Altizer, senior director of ERC. “These are environments where there is a lack of trust, poor communication, failure to keep promises and rewards provided to employees who use questionable means.”

Overall, in the past 12 months, approximately three out of 10 HR professionals (32%) and employees (30%) observed misconduct that they thought violated their organizations’ ethics standards, company policy or the law.14 Figure 11 shows the specific types of misconduct most frequently observed by HR professionals within their organizations, compared with the U.S. average (for employees).

The top five types of misconduct witnessed by HR professionals were:

1) Abusive or intimidating behavior toward employees (excluding sexual harassment) (57% of HR professionals and 22% of employees).

2) E-mail and/or Internet abuse (48% of HR professionals and 17% of employees).

3) Misreporting actual time or hours worked (46% of HR professionals and 17% of employees).

4) Behavior that places an employee’s interest over the organization’s interests (44% of HR professionals and 24% of employees).

5) Employees calling in sick when they were not (41% of HR professionals and 38% of employees).

Compared with employees (22%), a significantly larger proportion of HR professionals (57%) reported observing employee harassment in the workplace. Employees may not understand what constitutes, and hence recognize, abusive or intimidating behavior. For example, this can include derogatory remarks, visual messages that are demeaning or verbal or nonverbal innuendos about a person’s membership in a protected class. Developing anti-harassment policies, including an internal complaint procedure and training, and disseminating them to employees are among the steps that organizations can take to help prevent harassment and potential lawsuits.

E-mail and/or Internet abuse was observed by nearly one-half of HR professionals (48%), in comparison with 17% of employees. “I think that it [e-mail and/or Internet abuse] would be much higher if we could certainly track everything,” says Teresa A. Bailey of Caribbean Transportation Services – A FedEx Company. Interestingly, according to a 2006 SHRM weekly survey, monitoring e-mail and Internet use were among the most common activities in which organizations have increased their monitoring efforts within the past 12 months (45% and 58%, respectively).15 Internet abuse appears to be particularly problematic, with nearly

29

four out of 10 HR professionals reporting that their organization has fired (11%) or disciplined (27%) employees for non-work related Internet use.16 Organizations can address this challenge by developing and providing written policies regarding the use of technology, including e-mail and Internet.

“Some of these particular behaviors may be viewed as an ethical issue versus a typical HR issue,” explains Leslie Altizer, of ERC. “Often we see organizations drawing a line between what is the responsibility of the HR office and what should be handled by the ethics and/or compliance office. For example, discrimination, Internet abuse, OSHA laws, sexual harassment, etc. are generally punted to HR to deal with, and many ethics/compliance officers do not consider those behaviors within their domain, especially in government. Those officers sometimes see themselves as trying to prevent, detect and respond to behaviors such as bribes, financial fraud, etc.”

Although this survey question was asked slightly differently in the 2007 NWES, nearly twice as many HR professionals, compared with the U.S. average (for employees), reported personally observing the first four types of misconduct from Figure 11: abusive or intimidating behavior toward employees (excludes sexual harassment), e-mail and/or Internet abuse, misreporting actual time or hours worked and behavior that places an employee’s interest over the organization’s interests. It seems that employees would be privy to information that HR is not; however, these data suggest that HR is more aware than employees of the ethical issues taking place in the organization. Since HR is often involved in ethics policy development, training and enforcement, there is a greater need/responsibility for HR professionals to be in tune with what is going on in the organization. For example, in a 2006 SHRM weekly survey, most HR professionals (68%) believed that HR had a role in deciding the level at which employees were monitored.17 HR professionals are often called in to handle ethics violations so they may “see” more misconduct, particularly in these areas, than the average employee does.

A perception exists in business that tells individuals they must choose to do either the right thing or the profitable thing in a given scenario. HR professionals may struggle with this dichotomy more frequently than operational personnel due to increased exposure to programs or discussions that shine an ethical light on these choices.

Perceptions, though always valid, may not be unchangeable. An im-portant concept for all in business to consider is that this perceived

dichotomy may, in fact, be a fallacy. The more accurate corollary may be that in the long term, good ethics are your individual and organizational competitive advantage in business.

Johnson & Johnson is the perfect case study of a corporate giant sacrificing certain revenues from a favorite (and almost obscenely profitable) product line to protect the end consumer in an hour of domestic terrorism. Tylenol supply lines were being compromised; products were being deliberately poisoned and then returned to

The Tylenol Crisis: Johnson & Johnson’s RecoveryProfessor Marty Val Hill, SPHR, Woodbury School of Business, Utah Valley University

30

retail distribution channels. Through no fault of their own, seemingly random Johnson & Johnson customers were dying from exposure to the cyanide-laced tainted Tylenol [dating back to 1982].

Johnson & Johnson’s well-established corporate credo, drafted in the 1940s, declared that it “puts the customer first” and, as the company’s then vice president Laurence Foster declared, it had no choice but to recall the entire product line until the company could guarantee its safety—regardless of the financial cost. To do

otherwise, he said, would be “hypocrisy at its best—or its worst.” The short-term cost was more than a billion dollars. The results to-day are visible as safety seals on everything from Tylenol to bottled water. But it goes deeper than that. The unspoken truth in the hearts and minds of at least two generations became “Johnson & Johnson cares more about me than they do about their profits.” This short-term financial loss resulting from an ethical decision became the company’s competitive advantage for the past 20 years.”

While Gayle Porter, Ph.D., SPHR, GPHR, of Rutgers University School of Business – Camden, finds the data in Figure 11 to be extremely useful for identifying the most highly observed behaviors of concern, she thinks it is worth further exploring why the numbers differ so much between employees and HR professionals. She asks, “Do HR professionals really have better visibility into what is going on than the employees themselves? Are employees rationalizing what they see, so they do not identify it as the misconduct noted? I am not convinced any of the possibilities can consistently explain the extent of differences. Therefore, while these results may give a starting point on issues to look at for attempting intervention, I believe there is more of a story than we have yet uncovered about misconduct in organizations.” As noted earlier, employees may also not fully understand or recognize what constitutes misconduct that is in violation with the company’s ethics standards, company policy or the law. Organizations can take measures to increase employee awareness by improving communications and providing training on ethics and other workplace policies in general.

Where comparable HR data exist from 1997 and 2003, personal observations of misconduct that violated organization’s ethics standards, company policy or the law have generally declined (Table 7). Misreporting of actual time or hours worked (59% in 2003 and 46% in 2007) and stealing/theft (27% in 1997, 25% in 2003 and 18% in 2007) have both slightly declined over time; however, the most notable decline in observed misconduct was in the category “employees lying to supervisors” (45% in 1997, 53% in 2003 and 28% in 2007).

“It is interesting to note the reduction in employees lying to their supervisors. Most certainly, this is a positive result and trend that could stem from the beliefs and work styles of post-baby boom generations. Perhaps this trend is also signaling the decline of the ‘company’ or ‘yes man,’” suggests Arthur Crane, SPHR, CCP, of Capstone

31

Services. Along the same lines, it may also be the case that the nature of the relationship between employees and supervisors has improved over time. Employees who have positive relationships with their supervisors may be more likely to approach their supervisors openly with work-related ethical issues, as well as other issues, and trust their supervisors will be supportive and take appropriate action. In fact, the relationship with the immediate supervisor was deemed by employees (47%) and HR professionals (68%) as very important to job satisfaction, according to the results of the SHRM 2008 Job Satisfaction Survey.18

Violations of the privacy of employees was the one category in which there was a slight increase from 2003 (16%) to 2007 (23%). “New governmental requirements and better-articulated organizational privacy policies may account for this increase in observed misconduct related exclusively to employee privacy issues,” explains

Figure 11 | most common types of misconduct observed in organizations during Past 12 months

Abusive or intimidating behavior toward employees (excludes sexual harassment)

E-mail and/or Internet abuse

Misreporting actual time or hours worked

Behavior that places an employee’s interest over the organization’s interests

Employees calling in sick when they are not

Taking credit for someone else’s work

Employees lying to supervisors**

Misusing the organization’s assets**

Lying to employees, customers, vendors or the public

0% 10% 20% 30% 40% 50% 60% 70%

n HR professionals (n = 148) n U.S. average (employees) (n = 4,462)*

*The total number of completed interviews for the 2007 NWES was 3,452. However, as a result of population weighting, the n-size varies for different questions.**These categories were not asked in the 2007 NWES.Note: Data sorted in descending order by the HR professionals data. All employees were asked this question, whereas only HR professionals who indicated that they observed misconduct in the past 12 months were asked this question (32%). Employees were asked to reply “yes” or “no” to each of the items, whereas HR professionals were allowed to select multiple choices.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008) and National Workplace Ethics Surveys (NWES) (ERC, 2007)

57%

48%

46%

44%

41%

36%

28%

26%

26%

26%

22%

17%

17%

24%

38%

28%

32

professor Marty Val Hill, SPHR, of Woodbury School of Business, Utah Valley University. “The actual frequency of these same activities may not have increased at all. Instead, in the initial survey [2003], the activities may not have been reported because they were not considered to be misconduct at the time.”

In 2003 and 2007, similar proportions of HR professionals reported that they had observed lying to employees, customers or the public (31% and 26%, respectively), misuse of the organization’s assets (29% and 26%, respectively) and sexual harassment (25% and 20%, respectively).

table 7 | types of misconduct observed in organizations during Past 12 months (by hr Professional survey year)

1997

(n = 389) 2003

(n = 155)2007

(n = 148)

Abusive or intimidating behavior toward employees (excludes sexual harassment) – – 57%

E-mail and/or Internet abuse – – 48%

Misreporting actual time or hours worked – 59% 46%

Behavior that places an employee’s interest over the organization’s interests – – 44%

Employees calling in sick when they were not – – 41%

Taking credit for someone else’s work – – 36%

Employees lying to supervisors 45% 53% 28%

Misusing the organization’s assets 24% 29% 26%

Lying to employees, customers, vendors or the public* – 31% 26%

Violations of the privacy of employees – 16% 23%

Sexual harassment – 25% 20%

Stealing/theft 27% 25% 18%

Employees engaging in fraud, accepting or giving bribes, kickbacks or gifts that may conflict with organizational responsibilities

– – 16%

Inappropriate alteration of documents or records – – 16%

Violations of Title VII (discrimination based on race, color, gender, age or similar categories) 23% 16% 15%

Violations of workplace legislation (OSHA, FLSA and FMLA) – – 13%

Misusing insider information 14% 3% 5%

Purposeful misrepresentation of financial records or reports – – 4%

Altering results of product/service testing 16% 7% 3%

Provisions of goods or services that knowingly fail to meet specifications – – 1%

Other** – – 16%

* This question was asked differently in 2003 by specifying “management lying to employees, customers, vendors or the public.”**Other types of misconduct observed in organizations included violations of company policies (hiring practices, business conduct, drugs, etc.), conflicts of interest and inappropriate relationships.Note: Data sorted in descending order by the 2007 column. Only HR professionals who indicated that they observed misconduct in the past 12 months were asked this question. Sample sizes and percentages are based on the total number of HR professionals by year who answered this question. Percentages do not total 100% due to multiple response options. A dash (–) indicates that this particular category was not asked in 1997 and/or 2003. Source: Business Ethics Survey (SHRM/ERC, 1997), Business Ethics Survey (SHRM/ERC, 2003) and The Ethics Landscape in American Business (SHRM/ERC, 2008)

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rePorting oF ethical misconduct

Organizations count on their employees to let them know about ethical issues and concerns before major problems or scandals erupt. This information helps organizations identify potential problems and diffuse them before they result in more serious consequences. As shown in Figure 12, the vast majority of HR professionals in 1997, 2003 and 2007 reported their observations of misconduct (perceived violations of the organization’s ethics standards, company policy or the law) to management or another appropriate person during the past 12 months (79%, 73% and 82%, respectively). While there were still HR professionals who were reluctant to report misconduct (18%), this number appears to be decreasing compared with 2003 (27%). In contrast to HR professionals, a larger proportion of employees indicated that they did not report observed misconduct to management or another appropriate person (39%).19

Although only a small subset of HR professionals overall did not report misconduct (18%), the most common reasons cited by HR professionals for not reporting ethics violations were because they would have had to report it to the person involved (37%) or because they did not believe that corrective action would have been taken

Figure 12 | reporting observed ethics misconduct in Past 12 months (hr Professionals)

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

1997 ( n = 393) 2003 (n = 172) 2007 (n = 148)

n Yes n No

Note: Only respondents who indicated that they had observed misconduct in the past 12 months were asked this question.Source: Business Ethics Survey (SHRM/ERC, 1997), Business Ethics Survey (SHRM/ERC, 2003) and The Ethics Landscape in American Business (SHRM/ERC, 2008)

79%

21%

82%

18%

73%

27%

34

(37%). Approximately three out of 10 respondents did not believe that they could report anonymously (33%) or they feared retribution or retaliation from their higher-up (30%). These data are shown in Figure 13. Even though this question was asked differently in the 2007 NWES, employees typically did not report ethics violations because they did not think that corrective action would have been taken (52%), the issue had already been addressed by someone else (42%) and/or they resolved the issue themselves (37%).20

As previously mentioned, HR professionals often spearhead the administration of their organizations’ ethics standards (Figure 4), yet if they choose to voice their concerns, they face potential ramifications from the person directly involved in

Figure 13 | reasons for not reporting observations of ethics misconduct in Past 12 months (hr Professionals)

I’d have to report it to the person involved.

I didn’t believe corrective action would be taken.

I didn’t believe I could report anonymously.

I feared retribution from my higher up.

I feared retribution or retaliation from the person who was involved in the violation.

I didn’t want to get involved.

I resolved the issue myself.

It was to my advantage to not report the misconduct.

The issue had already been addressed by someone else.

I didn’t know whom to contact.

I thought someone else would report it.

I feared retribution or retaliation from my co-workers.

Other*

0% 10% 20% 30% 40% 50%

(n = 27)

*Other reasons for not reporting observations of ethics misconduct included doubt about the accuracy of the observation, common knowledge by those in charge and actions were sanctioned by upper management.Note: Only respondents who indicated that they did not report their observation(s) of misconduct to management or another appropriate person in the past 12 months were asked this question (18%). Caution should be exercised when generalizing the results due to the small n-size. Percentages do not total to 100% as respondents were allowed multiple choices.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

0%

0%

37%

37%

33%

30%

26%

22%

19%

11%

11%

11%

19%

35

the misconduct or their higher-up (which usually tends to be top management). Similarly, Teresa A. Bailey, of Caribbean Transportation Services – A FedEx Company, finds that “HR is often placed in a difficult situation in handling ethical situations, especially those that may involve management higher than their position.”

HR professionals and employees alike may be less inclined to report an ethics violation if they do not believe that their organization will take appropriate action to correct misconduct or if they fear retaliation. Organizations can take steps to encourage reporting by helping to ensure that there are means for people to obtain ethics-related advice and report violations confidentially or anonymously. In addition, it is important for organizations to have clear disciplinary steps so that

Increasingly, many organizations now have an ethics officer or pro-fessional in a similar role. This role is often an added function to the responsibilities of an executive or member of the senior manage-ment team, such as the vice president of human resources. To be effective, an ethics officer must have sufficient authority and status in the company. A 2007 article by the Ethics Resource Center, titled “Leading Corporate Integrity: Defining the Role of the Chief Ethics and Compliance Officer (CECO),” states that it is “impera-tive that the CECO report to the highest level of the organization.”21 2008 research from The Conference Board points out that it takes an organizational shift before the ethics and compliance function is elevated to be part of board strategy and vision.22 Finally, key findings from the Global Economic Crime Survey 2007 by Price-waterhouseCoopers, one of the most comprehensive international studies on economic crime worldwide, with interviews conducted with more than 5,400 companies in 40 countries, reveal that “the level of collateral damage is directly proportional to the seniority of the perpetrator.” In 29% of the cases where top management was involved, the damage to the company brand was very significant. Internal controls are not sufficient. Rather, it is the ethical corporate culture that plays a key role in deterring fraud, with companies that have ethical policies and compliance programs reporting fewer economic crimes.23

What is your management’s culture? Does it foster ethical behav-ior or does senior management look the other way? The following mini case study illustrates the importance of HR’s role to uphold

corporate ethics standards and help straighten out the company’s damaged financial health and reputation when misconduct occurs.

Mini-case study: Workplace Harassment

Situation A mid-size private manufacturing firm in the United States produces parts for the airline industry. In the Purchasing Department, the su-pervisor had been bullying his staff for years. In the past month, two key staff in the department resigned without notice. One of the re-maining employees had noticed great stress in his co-workers and was also getting fed up with the lack of respect from his manager.

Recently, the company had hired a new vice president of human resources. This HR executive had made a point of being accessible to the workforce and greeting each individual—on all three shifts—over the course of her first six months at the company. Over time, employees began to feel that she truly cared about the workforce. After enduring months of bullying, the employee from Purchasing decided to take a chance and speak with HR.

ActionsThe vice president of HR listened carefully to the employee and took copious notes. It was evident that the employee was unsure of his reception in HR, and so she assured him that the situation would be thoroughly investigated. The descriptions of bullying clearly pointed to a serious problem. Over the next two weeks,

An HR Perspective

36

the vice president of HR conducted interviews with the remaining three employees in Purchasing. She also contacted the two people who had resigned and met with them away from the company premises. The investigation revealed that the employees had been threatened with the loss of their jobs if they went to management to reveal that the supervisor had approved many contracts for one particular vendor, disregarding the company’s standard procedures for a request for proposal (RFP). As a result of the investigation, the Purchasing supervisor, with six years’ tenure, was fired. The two employees who had resigned were given the opportunity to return to the company; one accepted and one declined.

The investigation also revealed that although the company had an ethics policy, not all senior management was known for ‘walking the talk’ in terms of ethical behavior. Complicated by insufficient resources allocated to ethics compliance, the policy was not uniformly administered. Rather, the general viewpoint was to get the job done, whatever it took.

ResultsThe vice president of HR made the following changes:

1) The organization conducted a thorough review of the ethics policy, ensuring protection from retaliation for employees who reported ethics violations.

2) With support from the CEO, ethics training was made manda-tory for every employee, including top management and the board of directors, with the goal to improve the ethical environment.

3) Ethics training was added to HR orientation for all new hires.

4) The vice president of HR requested and received a direct line of report to the board of directors for ethics and compliance, so that the board would receive input regarding ethical leadership, workplace culture and decision-making.

5) In a letter to all employees, the CEO communicated the updated ethics policy and mandatory training for all employees and announced the vice president of HR as the company ethics officer, reporting to the board of directors.

6) The vice president of HR plans to administer an employee survey in three months to gauge employee morale and overall resulting transparency in the organization.

This mini-case study presents a scenario that demonstrates the im-portance of HR’s role to help rectify ethical dilemmas. Fortunately, the CEO of this company was open to changes in order to avoid serious ethical allegations in the future and maintain the company’s reputation in the marketplace. Full support from top management is essential for HR to be empowered to effectively address ethical situations in the workplace.

action can be taken quickly, fairly and consistently (Figure 2). Professor Marty Val Hill, SPHR, of Woodbury School of Business, Utah Valley University, shares a similar sentiment: “A key corporate responsibility in encouraging ethical behavior and in increasing the reporting of misconduct is to demonstrate a willingness to address issues that are reported. Few will risk personal security for the utilitarian good when they doubt their efforts will be appreciated or result in corrective action that honors their ethical organizational culture.”

When HR professionals and employees were asked about the extent to which employees could question the decisions of top management without fear of retaliation, HR professionals were less confident than the general employee

37

population that employees could question top management. These data are depicted in Figure 14. HR professionals from government agencies were less likely than HR professionals in publicly owned for-profit organizations to feel that employees could question top management.24

When HR professionals observe misconduct, to whom do they usually report it? As illustrated in Figure 15, typically HR professionals reported ethics violations to top management (60%) and/or a supervisor (48%). Reporting violations to upper management is not surprising given the frequent interaction between HR and these individuals. Although 49% of HR professionals reported having an ethics officer or a professional in a similar role at their organization (Figure 2), only 20% overall used that option. In addition, only 17% of HR professionals said that they reported the violations to another HR co-worker.

Depending on how the situation caused by the ethics violation was handled and resolved, it is likely to have an impact on whether an HR professional (or employee) will report a violation in the future. As shown in Figure 16, only slightly more than one-half of HR professionals were satisfied or very satisfied with their organization’s response to their report(s) of misconduct in the past 12 months (51%). This is clearly an area in need of improvement for organizations. Yet in light of these data, overall, three-fourths of respondents were satisfied (responded “agree” or “strongly agree”) with their organization’s efforts relating to ethics.25 Organizations can gain valuable information by routinely taking a pulse or surveying their employees on these topics and carefully monitoring the results. Through surveys and focus groups, organizations can identify and better understand the reasons behind the dissatisfaction and take corrective action.

Figure 14 | employees can Question the decisions of top management

50%

40%

30%

20%

10%

0%




7%5%

13%

19%

7%

23%

50%

15%

45%

16%

38

Figure 15 | to Whom observed ethics misconduct Was reported in Past 12 months (hr Professionals)

Top management (e.g., executive level, C-suite)

Supervisor

Other responsible person, including ethics officer

HR co-worker

Someone outside of the organization

Organization hotline or other hotline

Other

0% 10% 20% 30% 40% 50% 60% 70%

(n = 121)

Note: Only respondents who indicated that they reported their observation(s) of misconduct to management or another appropriate person in the past 12 months were asked this question (82%). Percentages do not total to 100% as respondents were allowed multiple choices.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

60%

48%

20%

17%

2%

2%

11%

Figure 16 | satisfaction With response to reported ethics misconduct in Past 12 months (hr Professionals)

50%

40%

30%

20%

10%

0%

Very dissatisfied DissatisfiedNeither satisfied nor

dissatisfiedSatisfied Very satisfied

(n = 120, average = 3.21)

Note: Percentages and averages are based on a scale where 1 = “very dissatisfied” and 5 = “very satisfied.” Only respondents who indicated that they reported their observation(s) of misconduct to management or another appropriate person in the past 12 months were asked this question (82%). Percentages do not total to 100% due to rounding.Source: The Ethics Landscape in American Business (SHRM/ERC, 2008)

14%18% 18%

33%

18%

40

The culture of the organization plays an important role, perhaps equally important to standards and practices, in the ethical behavior of employees and HR professionals.

An important way for organizations to help address concerns relating to misconduct and pressure to compromise ethics in the workplace is to make sure that there are adequate mechanisms in place for HR professionals and employees to get ethics advice and to report ethical concerns, such as protections for whistleblowers and a means where one can get advice about workplace ethics issues and confidentially or anonymously report ethical violations (e.g., specific office, telephone line, e-mail address or web site).

Many ethical situations are not clear-cut and require experience and expertise to arrive at a workable solution. When HR professionals were asked about their role in organizational ethics, the vast majority named their HR department as a primary resource for ethics-related issues and indicated involvement in formulating ethics policies for their organizations to a “moderate extent” or “large extent.” In spite of this, a large proportion of HR professionals do not feel that they are truly part of the ethics infrastructure in their organizations, even though they are often called upon to “clean up” the situations caused by ethics violations. HR professionals are less likely to be truly effective in addressing ethics-related issues if their role is unclear or haphazard. Organizations can benefit by bringing HR professionals into the early conversations when planning ethics-related programs. With first-hand experience in handling ethical and organizational issues, HR professionals can provide invaluable insight into the design, implementation and evaluation of these programs. This also requires that HR professionals be well-versed with SOX and its provisions.

Although an organization may have standards and practices in place to detect and deter ethical misconduct, there are other powerful forces at play. The culture of the organization plays an important role, perhaps equally important to standards and practices, in the ethical behavior of employees and HR professionals. This does not mean to imply that employees are not responsible for their own actions, but it does suggest that environmental factors make it more difficult for employees to act responsibly.

Ethical norms and behaviors are often influenced by what employees see others do. Their views of ethical conduct are affected by the CEO and other senior management staff, their supervisor, co-workers in the organization and other professional colleagues with whom they interact. As the survey revealed, top

Conclusions

41

For ethics to be taken seriously by employees, those in management positions must reflect and embody ethical standards.

management and supervisors, in particular, have a significant impact (both positive and negative) on the ethical corporate culture. The top two pressures to compromise organization’s ethics standards were pressures from top management and supervisors. When HR professionals are asked whom they reported the misconduct to, again, it was most often top management and supervisors. One encouraging finding was a decline by nearly half in 2007 from 2003 in HR professionals’ observations of misconduct related to employees lying to their supervisors.

For ethics to be taken seriously by employees, those in management positions must reflect and embody ethical standards. As the survey revealed, in general, most HR professionals were in agreement that employees at all levels (nonmanagement, supervisors and top management) are held accountable for their actions, talk about the importance of workplace ethics, set a good example of ethical behavior and are supported in following their organizations’ ethics standards.

Yet, there were some areas of concern, based on HR professionals’ responses. Six out of 10 HR professionals agreed or strongly agreed that employees could question the decisions of top management without fear of retaliation. A smaller proportion of HR professionals agreed that top management, in comparison with nonmanagement employees and supervisors, would be held accountable if caught violating organizational standards, relaying the message that the rules do not always apply in the same way to all employees. Talking about the importance of workplace ethics was an area of weakness for nonmanagement employees. It may be that nonmanagement employees are not as familiar with their organizations’ ethics standards as management is. This presents an opportunity for HR to inform them.

This research also revealed that abusive or intimidating behavior toward employees was the most prevalent type of misconduct observed in organizations within the past 12 months, as reported by nearly six out of 10 HR professionals. Approximately one-half of HR professionals said that they had observed e-mail and/or Internet abuse, misreporting actual time or hours worked and exhibiting behavior that placed an employee’s interest over the organization’s interests. While only two out of 10 HR professionals indicated that they did not report their observation(s) of misconduct, it was typically because they would have had to report it to the person involved or they did not believe corrective action would have been taken. This further emphasizes the point of having mechanisms in place for HR professionals to seek ethics-related support.

To establish an ethical workplace, organizations can begin the process by identifying and addressing employees’ concerns around ethics, taking a closer look at their existing ethics standards and practices, determining supportive procedures and training, and creating a culture where ethics is valued. In order to accomplish this goal, HR should ideally be part of the ethics infrastructure and will need support from all levels of management.

42

Demographics

hr ProFessionals

organization staff size

Small (1-99 employees) 32%

Medium (100-499 employees) 38%

Large (500 and more employees) 29%

(n = 478)Note: Percentages do not total to 100% due to rounding.

organization industry

Services (profit) 15%

Manufacturing (durable goods) 11%

Health 10%

Government 8%

Services (nonprofit) 7%

Manufacturing (nondurable goods) 5%

Wholesale/retail trade 5%

Construction and mining/oil and gas 4%

Educational services 4%

Finance 4%

High-tech 4%

Insurance 3%

Legal* 2%

Real estate* 2%

Transportation 2%

Utilities 2%

Hospitality* 1%

Telecommunications 1%

Newspaper publishing/broadcasting 0%

Other 8%

(n = 480)*For the purpose of the analysis, these categories have been recorded from the “other” category.Note: Percentages do not total to 100% due to rounding.

organization sector

Privately owned for-profit organization 46%

Publicly owned for-profit organization 25%

Nonprofit organization 17%

Government agency 10%

Other 2%

(n = 477)

43

job title

Manager/supervisor 28%

Director 21%

Generalist 17%

Specialist 7%

Vice president 5%

Chief human capital officer or chief human resources officer 5%

Administrator 4%

Assistant/associate director 3%

Assistant/coordinator 3%

President, CEO, chair, partner or principal 2%

Assistant/associate vice president 1%

Other C-suite executive 1%

Other 4%

(n = 480)Note: Percentages do not total to 100% due to rounding.

job level

Top management 26%

Middle management 45%

First-line supervisor 8%

Nonmanagement 20%

Other 1%

(n = 479)

hr tenure

5 years or less 20%

6 to 10 years 25%

11 to 15 years 20%

16 or more years 35%

(n = 479)

44

notes and caveats

Analysis: Analyses by HR professionals’ organization industry, staff size and employment sector are presented and discussed, when there were significant differences. When appropriate, the general results from the current survey of HR professionals are compared with previous survey years and the employee data (U.S. average) from the 2007 NWES. Only industries that had 20 or more respondents were included in industry analyses. Although respondents from other industries participated in the study, analysis from industries with fewer than 20 respondents sometimes yields inconclusive or questionable results. Organizations are grouped into three staff size categories based on the number of full-time and part-time employees at the company: small-staff-sized organizations (1 to 99 employees), medium-staff-sized organizations (100 to 499 employees) and large-staff-sized organizations (500 or more employees). Organization sectors include publicly owned for-profit, privately owned for-profit, nonprofit, government and other. Results are not presented for the “other” employment sectors due to the small number of organizations in this category.

Differences: Conventional statistical methods were used to determine if observed differences were statistically significant (i.e., there is a small likelihood that the differences occurred by chance). Therefore, in most cases, only results that were significant are included, unless otherwise noted.

Generalization of results: As with any research, readers should exercise caution when generalizing results and take individual circumstances and experiences into consideration when making decisions based on these data. While SHRM is confident in its research, it is prudent to understand that the results presented in this survey report are only truly representative of the sample of HR professionals responding to the survey.

Number of respondents: The number of respondents (indicated by “n” in figures and tables) varies from table to table and figure to figure because some respondents did not answer all of the questions. Individuals may not have responded to a question on the survey because the question or some of its parts were not applicable

Appendix

key terms

Ethics is defined as clear standards that help an individual tell the dif-ference between right and wrong behavior.

Organization’s ethics standards and organization’s standards of ethical workplace conduct terms are used interchangeably throughout the survey report. Examples include written or unwritten standards of ethics, policy statement on ethics or guidelines on proper business conduct.

The term misconduct deals with violations of the organization’s ethics standards, company policy or the law.

45

or because the requested data were unavailable. This also accounts for the varying number of responses within each table or figure.

Confidence level and margin of error: A confidence level and margin of error give readers some measure of how much they can rely on survey responses to represent all SHRM members. Given the level of response to the survey, SHRM Research is 96% confident that responses given by responding HR professionals can be applied to all SHRM members, in general, with a margin of error of approximately 4%. For example, 32% of the responding HR professionals reported that in the past 12 months they have observed misconduct that they thought violated their organization’s ethics standards, company policy or the law. With a 4% margin of error, the reader can be 96% certain that between 28% and 36% of SHRM members have observed such misconduct in the past 12 months. It is important to know that as the sample size decreases, the margin of error increases.

46

Society for Human Resource Management. (n.d.). 1 SHRM HR glossary of terms. Retrieved March 24, 2008, from www.shrm.org/hrresources /hrglossary%5Fpublished/.

Joseph, J., & Esen, E. (2003). 2 SHRM/Ethics Resource Center 2003 business ethics survey. Alexandria, VA: Society for Human Resource Management; Washington, DC: Ethics Resource Center.

This survey instrument is available upon request by contacting the SHRM Survey 3

Program at [email protected] or by phone at 703-535-6301.

The ERC developed the Program Index to measure the number of program 4

elements (variables) present in organizations. Each of the six variables has been designed to measure the extent to which organizations follow the rules recommended by the FSGO. Organizations that have all six elements are considered to have a comprehensive program.

These data are not depicted in a table or a figure.5




Measurement of organizational ethical culture has been created based on 24 9

variables and consists of the four elements of ethical culture. The four elements are ethical leadership, supervisor reinforcement, peer commitment to ethics and embedded ethical values. The culture has been defined in four measurement steps: strong culture, strong leaning culture, weak leaning culture and weak culture.

In the 2007 SHRM/ERC survey, HR professionals were asked about the peer 10

commitment of “nonmanagement employees” rather than “co-workers.” In addition, HR professionals were not asked the questions that related to the embedded ethical values element.

Endnotes

47



Joseph, J. (2000). 13 The ERC’s 2000 national business ethics survey: How employees perceive ethics at work. Washington, DC: Ethics Resource Center.


Society for Human Resource Management. (2006, September 29). Has your 15

organization increased employee monitoring within the past 12 months? [SHRM Weekly Online Survey]. Retrieved April 14, 2008, from www.shrm.org/surveys/.

Society for Human Resource Management. (2007, June 5). Has your organization 16

disciplined employees for improper use of technology? [SHRM Weekly Online Survey]. Retrieved April 2, 2008, from www.shrm.org/surveys/.

Society for Human Resource Management. (2006, September 29). Has your 17

organization increased employee monitoring within the past 12 months? [SHRM Weekly Online Survey]. Retrieved April 14, 2008, from www.shrm.org/surveys/.

Society for Human Resource Management. (2007). 18 SHRM 2008 job satisfaction: A survey report by SHRM. Alexandria, VA: Author.



The Ethics Resource Center. (2007, August). 21 Leading corporate integrity: Defining the role of the chief ethics and compliance officer, p. 20. Washington, DC: Author.

O’Brien, G. (2008, January). 22 A place at the table: Should the ethics function report to a company’s highest authority? New York: The Conference Board.

PricewaterhouseCoopers. (2007). 23 Economic crime: People, culture and controls. Retrieved January 29, 2008, from www.pwc.com.



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Other SHRM Research Resources on Ethics

SHRM Workplace Forecast (June 2008)

Social Responsibility and HR Strategy (Workplace Visions, Issue 2, 2007)

Leadership Series Part II: Ethical Leadership (Briefly Stated, November 2005)

Business Ethics Series Part IV: Business Ethics in the Global Arena (Briefly Stated, December 2004)

Business Ethics Series Part III: Business Ethics—Codes of Conduct/Ethics (Briefly Stated, December 2004)

Business Ethics Series Part II: Business Ethics—Corporate Governance (Briefly Stated, December 2004)

Corporate Social Responsibility: HR’s Leadership Role (Research Quarterly, December 2004)

Business Ethics Series Part I: Business Ethics Overview (Briefly Stated, May 2003)

To access these publications, please visit www.shrm.org/research

beneFits

2008 Employee Benefits (110 pages, June 2008) n

FMLA and Its Impact on Organizations (48 pages, July 2007) n

2007 Benefits (92 pages, June 2007) n

SHRM Survey Brief: Backup Care (3 pages, May 2007) n

SHRM Survey Brief: FMLA (4 pages, May 2007) n

2006 Workplace Vacation Poll Findings (37 pages, September 2006) n

Recently Published SHRM Survey Products

49

2006 Benefits Survey Report (86 pages, June 2006) n

comPensation

2006 HR Practices in Executive-Level Compensation Survey Report (39 pages, n

May 2006)

diversity

The 2007 State of the Workplace Diversity Management (80 pages, n

February 2008)

2006 Workplace Diversity and Changes to the EEO-1 Process Survey Report n

(44 pages, October 2006)

emPloyee relations

2008 Job Satisfaction (102 pages, June 2008) n

2007 Job Satisfaction (76 pages, June 2007) n

2006 U.S. Job Retention Poll Findings (47 pages, December 2006) n

health/saFety/security

2006 Weapons in the Workplace Survey Report (37 pages, November 2006) n

international

2006-2007 Employee Retention in China Survey Report (36 pages, n

October 2007)

2007 Corporate Social Responsibility Pilot Study (56 pages, April 2007) n

management Practices

2008 Managing Your HR Career (80 pages, February 2008) n

SHRM Survey Brief: Green Workplace (6 pages, January 2008) n

SHRM Human Capital Benchmarking Study: 2007 Executive Summary n

(55 pages, June 2007)

2007 Change Management Survey Report (52 pages, April 2007) n

The Look and Feel of Strategic HR—Conversations With Senior HR Executives n

(24 pages, December 2006)

2006 Strategic HR Management Survey Report (39 pages, October 2006) n

Manufacturing Industry Findings on Human Resource Topics (57 pages, n

August 2006)

50

2006 Succession Planning Survey Report (46 pages, June 2006) n

selection and Placement

SHRM and CCHRA 2008 Global Talent Sourcing in the United States and n

Canada (53 pages, March 2008)

2007 Advances in E-Recruiting: Leveraging the .Jobs Domain (44 pages, n

June 2007)

Finding and Keeping the Right Talent: A Strategic View (7 pages, n

November 2006)

Are They Really Ready to Work Survey Report (64 pages, October 2006) n

To access these reports and for a complete listing of all SHRM Survey Products, please visit www.shrm.org/surveys.

shrm members can download this survey report and many others free of charge at www.shrm.org/surveys. if you are not a shrm member and would like to become one, please visit www.shrm.org/application.

4413267815869

ISBN 978-1-586-44132-6

The Ethics Landscape in American Business Price: $79.95 Members/ $99.95 Nonmembers

62.27041

The Ethics Landscape in American Business - SHRM … · The Ethics Landscape in American Business...

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