For two decades, the Ethics & Compliance Initiative (ECI) routinely conducted its National Business Ethics Survey to give readers insight into the corruption and corporate malpractice that plagued American businesses. The most recent of these surveys, dating back to 2013, uncovered a disturbing trend — that most corporate misconduct was the result of continuous, ongoing behavior. In fact, only 33 percent of reported incidents were one-time events.

This trend begs the question — “How can such behavior be allowed to fester in so many organizations?” And based on other findings in the report, much of the blame can be laid at the feet of management.

Are your leaders helping to make your corporate ethics and compliance program a success? Watch: What is Tone at the Top?

According to the survey, 60 percent of workplace misconduct involved someone with “managerial authority.” And senior managers were frequently culpable, representing 24 percent of violations (a higher rate than mid-level or front-line managers).

Federal Anti-Corruption Expectations

The importance of management building an ethical culture is widely recognized among law enforcement agencies. In an anti-corruption resource guide jointly developed by the U.S. Department of Justice (DOJ) and the U.S. Securities Exchange Commission (SEC), the agencies outlines their belief that “[w]ithin a business organization, compliance begins with the board of directors and senior executives setting the proper tone for the rest of the company. Managers and employees take their cues from these corporate leaders.”

Similarly, Bill Baer, an assistant attorney general for the DOJ’s Antitrust Division stated in a 2014 speech that “[t]he board of directors and senior officers must set the tone for compliance to ensure that the company’s entire managerial workforce not only understands the compliance program but also has the incentive to actively participate in its enforcement.”

How Can Your Senior Leaders Promote an Ethical Culture?

Rethink decision-making

To build a culture of appropriate employee behavior, your corporate structure — including C-level executives and your board of directors — needs to incorporate ethical considerations into every business conversation. Before making a decision to raise prices or launch a new service or expand into a new market, encourage leaders to examine what ethical risks any of these moves could pose and what measures need to be undertaken to ensure proper oversight.

These efforts should extend into hiring and employee review processes as well. By establishing the ethical responsibilities of every staff member in job descriptions and performance evaluations, your business can make it clear that appropriate behavior is the “norm” for your organization, not the exception.

Embrace consistency

Based on the statistics previously mentioned, managers are frequently involved in corporate wrongdoing. And when they are caught, they need to be held accountable the same as any other employee. Otherwise your company is inviting a creeping infestation of unethical behavior.

Dan Ariely, a behavioral economist, recently demonstrated this trend in a series of experiments that revealed the disturbing tendency of people to engage in increasingly dishonest behavior when exposed to existing corruption.

Conversely, by having leaders model positive behaviors, such as participating in ethics training or quickly responding to policy violations, your firm can nudge employee attitudes in a more positive direction.

Avoid retribution

According to the ECI survey previously mentioned, only 63 percent of employees reported what they saw and roughly 21 percent of these reporting staff members experienced some manner of retribution.

Just this past month it was announced that the American CEO of Barclay’s was under investigation by British authorities as well as New York’s Department of Financial Services for attempting to uncover the identity of an anonymous whistleblower.

Along with a formal reprimand, the executive will experience a “very significant compensation adjustment” to his compensation package.

Rather than punishing whistleblowers — and inviting legal investigations — your management team needs to embrace their efforts. By offering anonymous reporting tools, your organization can more quickly identify issues and mitigate their impact before they become a criminal investigation or a national headline.

The Next Step

With a healthy tone at the top, your company can foster an ethical culture throughout the organization. And while your business can never fully prevent the errant behavior of a rogue employee, you can take steps to discourage misconduct from tarnishing your reputation, your brand, and your finances.

To learn more about how our code of conduct and business ethics courses can help your organization, request a demo today.