Corporate ethics programs have to mean business, new study confirms
Contacts:
PSU--Paul Blaum, (814) 865-9481, [email protected];
UD--Ginger Pinholster, (302) 831-6408, [email protected], or Laura Overturf, (302) 831-1418, [email protected].
A new study shows that corporate ethics programs work as long as the company values moral conduct as much as the bottom line.
"A firm's approach to ethics and legal compliance has an enormous impact on employees' attitudes and behaviors," says Linda Klebe Trevino, professor of management at Penn State. "The key is for the company to match ethical pronouncements with ethical practice. This translates into morally responsible leadership, fair treatment of employees, rewarding of ethical conduct and open discussion of ethics in the organization."
On the other hand, an ethics program will lose credibility if it stresses company self-interest above all else and discourages input from employees on ethical issues. An unethical corporate culture is more likely than an ethical culture to require unquestioning obedience to authority.
Furthermore, the company must guard against the perception that its ethics or legal compliance program exists only to protect upper management, according to Trevino.
Over 10,000 randomly selected employees in six large American companies with ethics compliance programs were surveyed by Trevino; Gary R. Weaver, assistant professor of management at the University of Delaware; David G. Gibson, director of the Office of Research and Evaluation at Milton Hershey School; and Barbara Ley Toffler, director of the Ethics and Responsible Business Practices Consulting Group at Arthur Andersen LLP.
Their findings were published in the paper, "Management Ethics and Legal Compliance: What Works and What Hurts," which appeared in the California Management Review.
Ethical violations can take many forms in a business, including lying to customers, padding an expense account, falsifying financial reports, giving kickbacks, stealing from the company and misusing insider information, Trevino notes.
"The official corporate position on ethics and legal compliance should motivate employees to aspire to ethical conduct, encourage them to raise questions when ethics are at stake and hold violators accountable for rule violations," says Weaver. He adds that his official position needs to be mirrored in the everyday, routine behavior of management.
Companies that emphasize ethics will generate numerous queries regarding the clarification of ambiguous ethical issues. These calls should also be fielded by the company itself, not an outside firm.
"Employees may have genuine questions about company ethics policies, and the complexities of putting those policies into practice in a complex and dynamic business organization. A trusted and informed insider is needed for answering such questions credibly," advises Weaver.
According to Trevino, there are times when outside consultancies are appropriate for answering questions about ethics.
For instance, one multinational company known for its attentiveness to ethics has contracted with an outside firm to answer its ethics telephone line after business hours so that callers from different time zones will always find a live person at the other end of the line.
"The company had found out that many callers would hang up rather than leave a voice mail message," Trevino notes. "However, this ethics office has also made it absolutely clear that this is an after-hours service. It is not intended to replace company staffers who normally answer the line."
Ethics Hotlines
Outsourcing is fine for some company functions, but not for telephone hotlines that allow employees to report ethical or legal violations, the researchers say. "Our studies indicate that companies are better off to retain responsibility for reporting and investigating ethical violations in-house," Trevino says.
"When employees take time to report ethical or legal violations, they need to believe that the company is interested in receiving these calls, takes them seriously and will commit resources to investigate and follow through. A company insider is more likely to leave that sort of symbolic message with callers," Trevino adds.
July 22, 1999
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