Ethics Bubble?

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Just spent some time reviewing the Ethics Resource Center's 2009 National Business Ethics Survey . There's some very interesting data in the report - some of which seems contradictory, which means I'm going to be spending more time this weekend digging into the details.

On the positive side, the survey revealed that:

• Misconduct at work is down
• Reporting of observed misconduct is up
• Ethical cultures are stronger, and
• Pressure to cut corners is lower.

But before we start congratulating ourselves too much, however, there were some cautionary data as well. For instance, 30% of people who observed behavior that constituted a "red flag" (activities that may be indicative of material fraud or questionable actions taking place) said they did NOT report it. You can't take appropriate action to mitigate potential misconduct if you aren't aware of it!

Furthermore, there is an interesting analysis of results from past Business Surveys that may suggest we are in an "ethical bubble."


If you look at the chart, you'll see that in the last economic downturn, reported misconduct also decreased, but as the economy improved, misconduct rose with it. While the sample may be a bit small, the parallels between the S&P Index and observed misconduct are fairly consistent. The ERC surmises this may be because in hard times management may talk (and inspect) more on the importance of high standards. Thus, misconduct goes down.

This really has me thinking...On one hand, I know that most of our clients are putting their money where their mouth is - allocating resources to ethics and compliance programs and making a true commitment to fostering an ethical culture. I don't see this changing as we exit the down turn. But the chart is revealing. Curious as to your thoughts - are we really in a bubble? Is this latest good news fleeting?

I'll leave you with the advice the ERC has for Ethics and Compliance Professionals:
Focus on culture and collect data! Now is the time to assess your culture and put in place processes - especially regarding the collection of potential violations of your stated code of conduct - for how you manage issues and events that expose your organization to risk.

Quick Links

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I've come across a number of really great research reports over the past few weeks, and wanted to share them with you. In each case I'm finding myself going back and finding a new nugget that directly relates to Governance, Risk and Compliance, and the challenges our customers and prospects face. I'd encourage all of you to download these reports if you have not already done so.

Kroll Global Fraud Report
This is the latest of the Kroll Fraud reports, where they survey hundreds of senior executives across the world to understand the impact of fraud and corruption, both in individual industry segments and in specific geographic regions. One of the things that stood out to me on first reading was that the overall incidence of reported fraud did not increase significantly during the past year, despite what was expected. But there are differences across the various industries and countries worth understanding.

If you'd like to get a quick overview of the contents in the report, you can attend a webinar we are hosting with Blake Coppotelli and David Holley of Kroll.

Transparency International's Global Corruption Report 2009
Learned about this one from the excellent FCPA Blog. This is a really comprehensive report (weighs in at 496 pages!) which definitely requires multiple visits. But to give you a taste of what's inside, consider:

• 90% of the top 200 businesses worldwide have adopted business codes, but fewer than half report they monitor compliance!
• Companies with anti-corruption programs and ethical guidelines are found to suffer 50% fewer incidents of corruption. While that may seem obvious -especially based on other research - the question I would have is why, then, do not all companies have business codes, and why do relatively so few monitor compliance?

Fulbright's 6th Annual Litigation Trend Survey
Stumbled on the 5th annual survey last year, so was pleased to learn the latest version is out. Interestingly, as opposed to what Kroll reports, this survey of mostly General Counsels, Head of Litigation, and people with titles just below those (e.g. Senior Counsel, Associate General Counsel, etc.) reported that the incidence of companies reporting corruption/bribery investigations over the past 12 months has nearly doubled since last year! But bribery/corruption is not the only thing with which these respondents are challenged. According to the survey 40% have seen increases in wage & hour, multi-plaintiff and employement cases over the past year.

As I said, there is a lot of great information in these reports - hopefully you'll learn something as well!