Is Ethical Misconduct a
problem in
your business?
"I don't have a problem.
There's no ethical misconduct in my
business!"
Chances are, you're wrong.
According to the National GIBS Ethics Barometer, over 45% of employees have observed ethical misconduct.
The problem is that only 30% of these employees ever report it, which means that you never find out about most of the ethical misconduct that is happening in your business.
There are 3 types of employee in every business
Honest Employee
The honest ones, who won't behave unethically, because it goes against their moral code.
Dishonest Employee
The dishonest ones, who are already behaving unethically – or will definitely do so at some point in the future
Mostly Honest Employee
The mostly honest ones who will yield to the temptation to behave unethically if the opportunity presents itself - especially when times are tough
Can you really say that all your employees are honest? Not very likely.
"OK, so fraud is happening in my company. How much is it costing me?"
According to the Association of Certified Fraud Examiners, companies lose on average 7% of turnover to fraud.
That's a serious amount of money you're throwing away. And in tough economic times, it's even worse.
The problem is that the prevalence of fraud - and the amounts involved - are increasing at an alarming rate.
"Do I need to do anything about it?"
Yes, absolutely!
Doing things unethically is bad for business on many fronts.
Just look at the non-financial effects of ethical misconduct - such as the negative impact on the company's reputation, bad publicity, loss of paying customers and investors, and the damaging effect on employee morale and staff churn. Lower employee morale is directly linked to lower employee commitment (which means more absenteeism), lower productivity, higher staff turnover and ultimately to poorer company performance.
To make matters worse, there is a growing chance that your company’s leadership is behaving unethically. An alarming 7% of CEOs were fired in 2018 for ethical misconduct, based on a PwC study of the top 2,500 global public companies – this was the first time in the study’s 19-year history that ethical misconduct was the # 1 cause of CEO turnover. Firing a CEO has a hugely negative impact on employees, customers, revenue, reputation and more. A bigger problem is that unethical behaviour filters down and is replicated in the rest of the organization.
On the flipside, doing business the right way is good for business. Businesses with strong governance practices, better ethics and compliance programs, more committed cultures and broad engagement with their communities have better business outcomes and higher shareholder returns. The Just 100 — the 100 most ethical companies in America — consistently and continuously outperform their industry competitors by 1 to 4 percentage points. Also, the world’s most ethical companies consistently outperform the markets, performing 3% better than the S&P 500 in 2016.
On top of this, you are probably legally required to do something about ethical misconduct. In most countries, legislation and corporate governance rules require you to have an appropriate anonymous reporting mechanism in place.
"What type of ethical misconduct are we talking about?"
Broadly speaking, ethical misconduct involves any of the following activities:
Sexual harassment
This includes unwanted sexual advances, unwanted requests for sexual favours, and other unwanted verbal or physical conduct of a sexual nature that tends to create a hostile or offensive work environment.
Workplace bullying
This is intentional, repeated mistreatment of one or more colleagues in the workplace, causing physical or emotional harm. It can be verbal, non-verbal, written and/or psychological, and may involve physical abuse, intimidation, degradation, humiliation, or asserting power through aggression.
Discrimination
This is the unjust or prejudicial treatment of different categories of people, especially on the grounds of race, age, or sex.
Breaches in corporate governance
This is any behaviour which goes against the rules, practices and processes by which an organisation is directed and controlled.
Conflicts of interest
This is when a person personally benefits from actions or decisions made in their official capacity working for the organization, including accepting of gifts.
Illegal practices
This covers all actions or practices that are against the law.
Unethical practices
This covers all actions or practices that may be legal, but are still wrong, unacceptable or lacking in moral principles.
So, we know that ethical misconduct is happening in your business. And we know that it's costing you a lot of money and has the potential to do incredible damage.
The problem is that whatever you're currently relying on to identify ethical misconduct in your business isn't working very well. Here's why ...