Have you been to the Honesty Coffee Shop in Batanes? The store has no cashier. Just get what you want to buy and leave your payment in the cash box. This shows that a business can operate with the ethical principle of honesty.
On 22 September 2016, the Securities and Exchange Commission issued the draft Code of Corporate Governance for publicly listed companies for public comments. Its goal is to help companies develop and sustain an ethical corporate culture. One of its recommendations is to establish a code of business conduct and ethics that would “provide standards for professional and ethical behavior, as well as articulate acceptable and unacceptable conduct and practices.” It is the job of the company’s board of directors to implement the code and make sure that management and employees comply with internal policies.
Some companies are in the process or have already developed their code. The real challenge is in its implementation and monitoring compliance. This year, the Ethics & Compliance Initiative (ECI) conducted and released its first Global Business Ethics Survey. ECI is a leader in ethics and compliance research; it provides networking opportunities, and certification to its members (www.ethics.org). In the Global Business Ethics Survey, it investigated workers’ experiences with ethics in the workplace, using four metrics: Pressure to compromise organizational standards; Observed misconduct; Reporting misconduct when observed; and Retaliation against reporters.
These metrics provide critical insights into the ethics environment and highlight risks that emerge from lapses in workplace integrity. ECI has introduced an expansive view of workplace integrity. It is doing what is right at work—avoiding corruption and complying with laws. It includes compliance with the universal ethical principles, e.g. respect, fairness and honesty.
Pressure to compromise organizational standards
One of the major warning signs for future misconduct is when employees feel pressured to compromise organizational standards. In the survey, more than one out of five respondents across all sectors felt this pressure. Three-quarters of that number were witnesses to misconduct in their workplace.
In order to combat this problem, it is important to track down where the pressure is and what is its root cause.
The survey recommends reviewing the company’s internal performance system. Quotas, bonus structures, profit sharing arrangements, and the like could be sources of pressure to violate company policies. The company also needs to communicate with its employees effectively, with emphasis on how upholding the company’s ethics is just as important as meeting the desired operating results.
Even more common than the number of respondents feeling pressured were those that reported observations of misconduct, at a median of 33 percent. Observed misconduct is the basic indicator of the state of integrity in the workplace.
It is common to see reports of high-profile problems in the media these days, with bribery and fraud as prime examples. But in the day-to-day interaction in the workplace, it is easier to find issues like that of problematic communication and poor conduct. The survey found that the most common misconducts observed in the workplace are: lying (either to customers, employees, vendors, or the public) and abusive behavior.
One way to address the overall problem of misconduct in the office would be to focus first on these two main problems. The survey has suggested several initiatives that might help combat these problems: (a) understanding employees’ feelings and experiences (both positive and negative) using activities like focus group discussions and surveys; (b) ensuring that the ethical culture is enforced at the top in order to create a model for employees to follow; (c) including ethical leadership and integrity as a criterion in employee evaluation and promotions; and (d) investing resources to investigate reports to make sure it is not part of a larger pattern of bad behavior.
Reporting misconduct when observed
Fortunately, in most of the countries surveyed, employees report observed misconduct to their superior at a median of 59 percent. This is good because it is reporting that greatly helps management to address misconduct. It lets management know when there is a problem, what the problem is, where it is coming from, and how they can fix it. No reporting allows these wrongdoings to take root, continue and get worse thus creating and developing non-compliance and unethical culture in the company.
Retaliation against reporters
Unfortunately, the chances of coworkers retaliating against those who reported them are significantly high. According to the survey, “At least one in three reporters across all sectors experienced retaliation in 11 of 13 countries surveyed.” Forms of retaliation include silent treatment, verbal harassment, demotion, undesirable assignments, or even violence. The threat of retaliation is the biggest factor behind the decision of those who chose not to report misconduct in their workplace.
In order to encourage reporting of incidents, the company needs to put in measures to protect reporters from retaliation. They must build a bond of trust with their employees, ensuring confidentiality and resolving issues reported. A system of support and surveillance should also be in place, in order to watch out for retaliation against the reporter and to lend assistance, if necessary.
Integrated approach to ethics programs
Implementing a Code of Business Conduct and Ethics is a strong safeguard provided by the regulatory environment. The real challenge is how to live the Code. Bribery and corruption continue to be the focus in current ethical discussions because of the higher risks associated with these and the problems they pose in our society. However, living the Code on a daily basis is something that should merit equal attention.
Having an integrated approach in implementing the Code is one of the solutions. This approach is based on a greater awareness of the sense of purpose of the company and the corporate values that guide its existence. The Code then comes to life with the ethical corporate and individual actions of those charged with corporate governance and its people moving towards realizing this purpose.
Rodel Acosta is a Partner from Assurance, Ethics & Business Conduct Leader and Partner Responsible for Independence of Isla Lipana & Co./PwC Philippines. Email your comments and questions to email@example.com. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.