Why Many Companies’ Ethics and Compliance Efforts Fail to Generate Good Behavior and Prevent Misconduct

Research from LRN Corporation Shows What Leads to Ethical Conduct, and Reveals That Too Few Companies Follow the Path

NEW YORK, April 03, 2018 (GLOBE NEWSWIRE) — Recent sexual harassment scandals at corporations add urgency to the question of what kinds of ethics and compliance efforts deter and correct misconduct throughout an organization – and what kinds are ineffective, or even inadvertently reinforce unethical behavior.

The 2018 Ethics and Compliance Program Effectiveness Report from ethics and compliance firm LRN lays out the core characteristics of corporate ethics and compliance (E&C) programs that coincide with more ethical behavior and less misconduct. It also points out that companies with strong, values-based E&C programs – as opposed to those that are just based on rules – are much more likely to perform better financially, and are more likely to meet the new U.S. Department of Justice’s (DOJ) criteria for such programs.

The report is based on research and a survey of 400 ethics, compliance and legal professionals, and evaluates and ranks E&C programs based on their influence on workplace behavior.

Notably, the report reveals that nearly half – 44% – of E&C leaders believe their companies’ programs still focus mainly on rules and regulations as opposed to values.

“Our findings suggest, unfortunately, that many organizations haven’t fully committed to the steps necessary for real change when it comes to organizational character and behavior,” said LRN Senior Adviser Susan Divers. “While rules are important, companies can’t realistically have a rule for each occasion, and therefore need strong values to guide behavior.”

Values and Action at the Top Make for Affirmative Conduct and Strong E&C Programs

The most effective ethics and compliance programs, in addition to emphasizing values over lists of rules, do the following, according to LRN’s 2018 research…

  • Ensure that the company analyzes the root cause of misconduct, rather than simply punish misconduct. “Leaders must understand why misconduct happens— a poisoned apple or a poisoned tree? – in order to effectively prevent it,” Divers said.
  • Embrace accountability and transparency, even if it means holding senior leaders or successful performers accountable for their actions. “The most successful ethics and compliance programs involve senior leaders, boards of directors and middle managers – not just lawyers or compliance staff. Everyone needs to be held equally accountable for misconduct,” said Divers.

Where and Why Many E&C Programs Fall Short

The research shows that companies fall short when it comes to enacting ethics and compliance programs that will have meaningful, positive outcomes. For instance:

  • Less than half – 49% – of ethics and compliance professionals say senior leaders in their company get actively involved in and take responsibility and action for compliance failures.
  • Only 38% of ethics and compliance professionals say their organizations’ leaders support effective sanctions or penalties on senior executives and strong business performers involved in misconduct.
  • Very few E&C professionals – only 31% – say their companies recognize ethical behavior formally: Only 22% of E&C professionals say their organization celebrates ethical conduct and leadership with a written commendation, and only 11% say employees are rewarded with a bonus for such behavior.
  • Only 21% of E&C executives say their organization considers ethical behavior a significant factor in promotions, and only 21% say it factors into compensation.
  • Only 43% of E&C professionals say their organization’s leaders consider E&C factors in business and planning decisions like new business ventures, mergers and operations reviews.

“The bottom line: Getting companies to think and act differently about their E&C programs will not only improve workplace conduct, but probably also business performance,” Divers said.

Click here to access LRN Corporation’s 2018 Program Effectiveness Report.