LRN research: Values trump rules when it comes to ethics and compliance effectiveness

2023 Program Effectiveness Report underscores need for E&C investment and support amid economic and political uncertainty

NEW YORK (February 1, 2023) – With economic and geopolitical headwinds looming large around the world, companies and organizations need to pay even more—not less—attention to their ethics and compliance (E&C) efforts to ensure resilience and optimal performance, indicates a new report from LRN Corporation.

The 2023 edition of LRN’s E&C Program Effectiveness Report is based on survey responses from more than 1,850 ethics and compliance professionals at companies and organizations with at least 1,000 employees, across 26 industries and in 10 different countries—making it the largest and most comprehensive research of its kind.

According to the research, 85% of respondents report that their ethical cultures were stronger as a result of their experiences meeting the challenges of the past year, with more than half of respondents giving their executives high marks for taking ethical considerations into account in business decision-making. More widely, a majority of respondents (84%) said their organizations relied on values, rather than rules, to motivate their employees to “do the right thing.”

However, the research also highlights key areas where improvement is much needed to strengthen E&C programs, with a significant proportion of respondents identifying that inadequate internal systems (76%), staff shortages (73%), budget constraints (73%) and employee disengagement (68%) are major obstacles to program effectiveness.

Among the other notable findings from this year’s report include:

• Despite the war in Ukraine and enhanced/escalating sanctions on a number of countries globally, only a quarter (25%) of respondents said that they plan to enhance their trade controls and sanctions training and just under half (45%) have strengthened risk controls in this area
• Most respondents (60%) felt that their board of directors actively ensures that misconduct by senior executives is effectively addressed, with three-fifths of those surveyed reporting that their organization has formal requirements to take into account executives’ and employees’ ethical behavior in performance evaluations, promotion decisions, bonus awards and hiring for key control functions
• More than two-fifths (44%) of respondents say that their organization has disciplined or terminated the employment of a senior executive or top performer for unethical behavior in the past year – with three quarters (76%) of those respondents saying that the individual was subject to financial “claw back”
• Increased focus on ethics and compliance is making a real difference on the ground, with more than half (52%) of respondents reporting that consideration of ethical and compliance factors and risks leads to their organization substantially modifying or even abandoning a business initiative where necessary
• Greater use data and metrics to assess program effectiveness was reported by more than half (52%) of respondents, but only 20% actually improved their ability to capture and understand such metrics

“This year’s report shows more starkly than ever before that there is a significant performance gap between organizations which are doing the minimum and those aspiring to the maximum when it comes to ethics and compliance,” said LRN senior advisor Susan Divers, a former award-winning chief ethics and compliance officer and lead author for the report. “Given the emphasis by regulators around the world on personal accountability and rapidly emerging, highly complex risks, is it critical that boards and C-suite leaders ensure their organization’s E&C programs are well resourced and supported.”

“Businesses around the world find themselves in the midst of a ‘perfect storm’ at the moment, including growing regulatory scrutiny, economic uncertainty, stakeholder activism, trade sanctions, and supply chain disruptions, among many other factors,” added Kevin Michielsen, CEO of LRN. “The link between fostering an ethical culture and business performance is clear, and will be increasingly critical in order to weather these challenges and navigate what will continue to be difficult terrain ahead.”

About LRN Corporation

LRN's mission and purpose is to inspire principled performance and help people around the world do the right thing. Since 1994, LRN has worked to propel organizations forward with the partnership, knowledge, and tools to build ethical culture. More than 2,500 companies and tens of millions of learners worldwide utilize LRN services and take LRN e-learning courses to help navigate complex regulatory environments and foster ethical, responsible, and inclusive cultures. In partnership with LRN, companies translate their values into concrete corporate practices and leadership behaviors that create sustainable competitive advantage. By acting upon shared values, companies and their people find the means to outbehave and outperform. Learn more at LRN.com and follow on Twitter, LinkedIn, and Facebook.