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In March, Jordan Thomas spoke with Dr. Patricia J. Harned, CEO of the Ethics & Compliance Initiative (ECI). Dr. Harned oversees ECI’s research agenda and its networking and conference events. She also directs outreach efforts to policymakers and federal enforcement agencies in Washington, D.C and advises CEOs and directors on effective ways to build an ethical culture and promote integrity in the workplace.
JAT: In 2014, the Ethics Resource Center formed a strategic alliance with the Ethics & Compliance Officer Association. As the CEO of the new organization, the Ethics & Compliance Initiative, can you tell us about the ECI and your vision for the future?
PJH: Our goal in aligning the two non-profits was to bring together the thought leadership of the ERC and the members of the ethics and compliance community. Not only did we aim to provide more access to the latest research; we wanted to have more practitioners involved in the development of our research strategy. In essence, we created a best practice community of organizations dedicated to creating high quality ethics & compliance programs.
JAT: Since 1994, the ECI has conducted the definitive study of workplace ethics, which is closely followed by academics, corporations and media outlets. Can you tell us about the Global Business Ethics Survey and its new direction this year?
PJH: Historically our organization has fielded a biennial survey among U.S. employees. In 2016, we expanded our focus to establish global benchmarks and created a first-of-its kind study of workplace conduct in 13 countries around the world. This year we combined both the US and the global studies under one name; the Global Business Ethics Survey. In our latest report, we shared recent data on U.S. employees and data for global benchmarks. Going forward, we will release a new report on the global data every quarter.
JAT: When developing the SEC Whistleblower Program, corporate America expressed concern that the program would undermine corporate compliance programs. What, if anything, has your research shown?
PJK: We’ve done significant research into employee reporting of misconduct and what we’ve seen consistently is that the vast majority of employees first report internally. Most go to an immediate supervisor or someone within management. It’s only after they’ve reported internally, often multiple times, that the employee turns to the SEC or another government agency. Their motivation is not financial reward; it’s really to try to get someone to stop the problem.
JAT: Your recent study presented an alarming finding – the rate of retaliation against individuals who report misconduct has doubled in the past two years. What are your thoughts on that?
PJK: It’s alarming in large measure because we know from prior research that when there’s an increase in retaliation and the company develops a reputation for widespread retaliation, it has a silencing effect on employees. People won’t come forward to raise concerns. So we note in the current report that even though key metrics are positive – misconduct is down, and reporting is up – the fact that retaliation has doubled is very concerning.
JAT: Your study demonstrated that pressure to compromise standards is also at an all-time high. Can you talk a bit about why pressure matters when examining workplace ethics?
PJK: Pressure as a metric actually doesn’t change much over time; it’s usually a fairly flat number. So the fact that we’ve seen an uptick is worrisome for two reasons. First, when employees feel significant pressure to just get the job done, they’re much more likely to compromise their standards and engage in wrongdoing. In addition, 87% of people who experience pressure also observe some kind of misconduct happening in the workplace. Where there’s smoke, there’s fire. If pressure is on the rise, then misconduct probably will be too.
JAT: In the past, your research has shown that the best way to combat misconduct is to build an ethical culture. In what ways does culture matter and how is it tied to reporting rates?
PJK: A strong corporate culture is the most effective way to reduce misconduct, increase reporting, minimize pressure and eliminate retaliation. Typically, it’s achieved by establishing a high-quality ethics & compliance program. But culture is really about ‘tone from the top’; employee experiences with supervisors; and whether leadership is supportive of the standards and encourages employees to raise concerns. It is a measure of employees’ willingness to bring bad news forward and whether there’s accountability in an organization. In our industry, we say that culture trumps compliance every day of the week. You can have a terrific compliance program, but if you have an organizational culture where the rules don’t really matter, you might as well not have a program at all.
JAT: For the last two decades, you’ve been at the forefront of the corporate ethics movement. How has it evolved and where do you think it’s going?
PJK: It has been interesting to watch the industry evolve. Corporate ethics really expanded after Sarbanes-Oxley. The field has grown more complex with various regulations, international influence and enforcement efforts, which impact how practitioners go about doing their jobs. Within the next five years, a significant wave of retirements are expected in the industry. The next generation of ethics & compliance leaders will look very different. We also are beginning to see greater reliance on data analytics to monitor an organization’s culture and risks for non-compliance. These things will force us to re-examine the purpose of an ethics & compliance program, and who’s qualified to oversee and shape it.
JAT: What are common mistakes that organizations make when dealing with whistleblowers?
PJK: When whistleblowers report a serious violation of the law, they can’t be treated differently than any other employee who comes forward to report wrongdoing. If whistleblowers are treated in a way that is inconsistent with other reporting efforts, they can actually perceive the process itself as retaliatory. Second, many organizations immediately assume that a whistleblower is a disloyal employee. To the contrary, most of our research has shown that reporting misconduct is an act of great loyalty. So the way companies think about employees who come forward, especially the way they define whistleblowers and treat them; these are often areas of concern.
JAT: Now, a related question – what advice do you have for responsible organizations that want to properly handle whistleblower matters?
PJK: First, we recommend that organizations have an ombuds or advocacy program of some fashion so that whistleblowers have a way to seek guidance and support. They also have a means to stay apprised of the reporting/investigation process. Second, companies should implement an anti-retaliation program to monitor employee whistleblowers and ensure they are protected and successful. Finally, in my view, it is mission-critical for every organization to review its reporting process to ensure that there is consistency and fairness in the way the organization handles employee reports of suspected misconduct.