Whether a company acts ethically is a significant factor in the average American's willingness to work for an employer, according to independent research released August 7 by LRN, a leading provider of governance, ethics and compliance management applications and services. In fact, more than one in three employed Americans have actually left a job because they disagreed with a company's business ethics.

 

The latest LRN Ethics Study provides new evidence that links a company's ability to foster an ethical corporate culture with an increased ability to attract, retain and ensure productivity among U.S. employees. Results are based on telephone interviews conducted among a sample of full-time American workers as part of an omnibus survey from Opinion Research Corporation. Findings include:

 

- A majority of workers – 94 percent – say it is "critical" or "important" that the company they work for is ethical.

 

-  Eighty-two percent said they would prefer to be paid less but work for a company with ethical business practices than receive higher pay at a company with questionable ethics.

 

-  Eighty percent cite disagreement with the ethics of fellow employees, a supervisor or management as the most important ethical reason for leaving a job. Twenty-one percent cite pressure to engage in illegal activity.

 

-  Fifty-six percent of U.S. workers define their current company as having an ethical culture. Yet one in four say that in the past six months they witnessed unethical, and even illegal, behavior where they work. Among those, only 11 percent say they were not affected by it.

 

"Our findings confirm that companies with a commitment to ethical conduct enjoy distinct advantages in the marketplace, including attracting and retaining talent," said LRN CEO and chairman Dov Seidman. "Companies that inspire principled conduct throughout their workforce also experience fewer ethical distractions. The LRN Ethics Study brings greater clarity to the nexus between ethical behavior and business success."

 

Importance of Working for Ethical Company

Virtually all Americans want to work for a company that they believe is ethical, with 57 percent saying it is critical, the LRN Ethics Study found. However, there is a distinction in importance by sex, geography and occupation. Working for an ethical company is slightly more critical to women, 63 percent, than men, 53 percent. Full-time employees in the West and South, 62 and 61 percent respectively, are more likely than those in the North Central and Northeast, 54 and 48 percent respectively, to say it is critical to them. Two-thirds of those in professional and managerial occupations, 68 percent, say this is critical to them, compared with 53 percent of sales and clerical employees and 45 percent of blue-collar workers.

 

The Link Between Ethics and Pay

Eighty-six percent of Americans employed full-time in professional or managerial positions would prefer to work for an ethical company rather than be paid more, compared with 76 percent of those working in blue-collar occupations. Those 35 and older are slightly more likely than younger workers to choose working for an ethical company over more pay, 85 percent versus 76 percent, although clearly both groups prefer working for an ethical business.

 

Disagreement with Ethics Leads to Employee Turnover

Not only do employees want to work for ethical companies, but the LRN Ethics Study found that employees are willing to leave when they are dissatisfied with their employer's ethics. More than one-in-three respondents, or 36 percent, said they have left a job because they disagreed with a company's ethical standards for doing business. This is true of Americans regardless of gender, age or socioeconomic factors. However, workers in the West are the most likely to have left a company because of concerns with the company's ethical standards, 43 percent, and Americans living in rural areas are more likely than those in metropolitan environments, 43 percent vs. 34 percent respectively.

 

The most common ethical reason for leaving a company is disagreement with the ethics of fellow employees, a supervisor or management, according to 80 percent of those surveyed. Moreover, one in five, or 21 percent, of those surveyed felt pressure to engage in illegal activity, a number equal to 8 percent of Americans employed full-time. Other ethics-related reasons for leaving a job include feelings by employees that the company was not acting according to its promises or corporate values, 72 percent, and employees feeling pressure to compromise their own ethical standards, 67 percent.

 

U.S. Workers Define Their Cultures

A majority of Americans working full time, or 56 percent, says their current employer embraces ethics and corporate values in everything they do. This is a significant figure given the focus regulators and other corporate stakeholders place on a company's ability to foster a strong ethical corporate culture. In 2004, the U.S. Sentencing Commission heard testimony from LRN about the need for companies to foster ethical cultures instead of check-the-box, compliance-only approaches. These views helped shape the amendments to the Federal Sentencing Guidelines, which now call for companies to promote an organizational culture that encourages ethical conduct.

 

Despite the positive overall findings, about half as many, or 30 percent, say their company merely tows the line by following the law and company policies. The remaining nine percent, or nearly one in 10 people surveyed, say they either work at a company where they do what they are told and are not encouraged to ask questions about what is right or wrong, or they often see management and peers acting in questionable ways.

 

Witnessing Unethical Behavior on the Job

Although the majority of employees think highly of their employer's ethical business practices, one-fourth of those surveyed, or 25 percent, said that in the past six months they have witnessed a colleague acting unethically (18 percent), illegally (7 percent) or in a harassing or discriminatory manner (14 percent). Cross-referencing this data with data from previous questions found among those who left a job because of ethical considerations, 20 percent say they have seen a colleague acting unethically in the past six months, compared with 12 percent of employees who have not left a company due to ethical issues.

 

Impact of Unethical Behavior

Among those who have witnessed this behavior, about one in four say they do so at least once a week, including 12 percent who say that they are a daily occurrence and an additional 12 percent who say that they happen at least once a week.

 

Besides affecting a company's ability to recruit and retain employees and increasing the legal, regulatory and compliance risks a company faces, unethical behavior has an impact on an employee's productivity. Very few of those who experienced unethical behavior on the job – only 11 percent – say they were not affected by it, the LRN Ethics Study found. Half of those surveyed admitted that unethical behavior is a distraction on the job. Further, 63 percent spent time talking about unethical behavior with colleagues. Nearly as many, or 49 percent, spent time talking about ethical issues at work with family and friends, and almost one-third, or 32 percent, went so far as to speak with management or make a formal complaint.

 

Impact of Unethical E-Mail

About one in three, or 35 percent of surveyed employees, has experienced unethical behavior in the form of e-mails, not including "spam" e-mails, in the workplace. Of those, 8 percent said they receive such e-mails daily, while more than half, or 54 percent, say they never do, and one-in-five say they rarely do. Of those who received unethical e-mail while on the job, 75 percent said they ignored it. Among those who took some action: 22 percent said they spoke personally to the colleague who sent the email; 13 percent asked a supervisor or management to get involved; 11 percent shared the e-mail with another colleague; and 6 percent forwarded the e-mail to someone outside the company. Four percent admit responding to the e-mail but later regretted their response.

 

"Although the survey results confirm employees care deeply about the ethics of their employers, they also suggest companies have an opportunity to do a better job of making ethics paramount to their culture and business," said Seidman. "An ethical culture where employees and management use values and not rules to self-govern can only take root when executives, managers, supervisors and employees understand and embrace the company's principles and values and incorporate them into their daily conduct."