RAISING THE ETHICAL BAR ETHICAL AUDITS AND POSITIVE CULTURE TRANSFORMATION

While most organizations have a code of conduct (or a code of ethics), many employees don’t care about, nor even recognize, their own company’s code of ethics. As pointed out by Liran and Dolan (2016)¹ , “There is a growing discrepancy between the values stated on the wall and values in action.” In the “Report to the Nations: 2020 Global Study on Occupational Fraud and Abuse”, the Association of Certified Fraud Examiners estimates that organizations lose approximately 5% of their revenue or $4.5 trillion globally to occupational fraud and abuse each year² . Furthermore, the European Anti-Fraud Office (OLAF) reports fraud of roughly €485 million to the EU budget in 2019 alone³ . Clearly, there is a lack of ethics in both the private sector and in government. Research suggests that unethical behavior is not unique to a time or place and that unethical acts happen in organizations of all types and across all industries.

Companies with unrealistic revenue goals are more likely to pressure employees to cut corners to achieve short-term results.

The Yale Center for Emotional Intelligence, in collaboration with the Faas Foundation, conducted a national survey of more than 14,500 employees across industries to better understand how Americans experience work. The sample represented the U.S. economy in its distribution of industries, sectors, and demographic diversity. While the majority of workers stated that they never, or almost never, experienced pressures from management (or direct supervisors) to act unethically, 11% sometimes experienced this pressure and 12% experienced this pressure often. In other words, 23%, or nearly one in four people, feel pressure to do things they know are wrong. In the research, the authors suggested that we need to . While there are many reasons that employees engage in unethical behavior, one reason is that employees want to find ways to benefit their organization. In the process, they often face a conflict between the desire to maximize self-interest and the desire to act ethically. Other reasons for engaging in unethical behavior may include: (1) Influence of supervisors and/ or peers, (2) Actions consistent with Social Exchange Theory where employees feel underpaid and thus allow themselves to settle their lack of rewards by cheating and bypassing the organization’s ethical codes, (3) Productivity crisis and the perceived urgent need to do whatever it takes to contribute to the firm’s success.