Reporting of suspected wrongdoing in organizations has reached a historic high in the United States, but so too have instances of retaliation against those who report violations. Meanwhile, only one in five employees say their company has a strong ethical culture.
The percentage of employees who say they have reported misconduct that they observed, either through company hotlines or directly to supervisors or company officials, has increased by a whopping 20 percent from 2013 to 2017, according to a new report from the Ethics & Compliance Initiative, a non-profit ethics think tank. But as the rate of whistleblowing has increased, so too has retribution for such reporting. The rates of retaliation for reporting of suspected wrongdoing have doubled in the last two years, according to ECI’s Global Business Ethics Survey.
Even while more employees are speaking out about problems and transgression when they see it, the actual rate of incidents of misconduct has declined. According to the report, observed misconduct has declined 15 percent since the survey was first conducted in 2013, nearly an all-time low.
“The data suggest that, while conduct in organizations has improved, there is cause for concern,” said Patricia Harned, CEO of ECI. “Pressure for employees to cut corners is on the rise, along with retaliation for reporting. Previous GBES studies have shown that these are the two indicators of trouble ahead.”
The increase in retaliation against whistleblowers will be particularly troubling to many risk managers and internal auditors, since many have taken actions to prevent reprisal for reporting wrongdoing. It is also surprising. A provision in the Dodd-Frank Act, passed in 2010 provides legal protection for whistleblowers at companies who report potential securities law violations. That law has spurred many companies to adopt better anti-retaliation measures generally. Last month, however, the U.S. Supreme Court ruled that the anti-retaliation measures only applied to whistleblowers who reported cases of inappropriate behavior to the Securities and Exchange Commission.
Additional Highlights from U.S. Data:
- Rates of observed misconduct have declined 15 percent since 2013, close to historic low.
- 16 percent of employees experienced pressure to compromise ethical standards, a 23 percent increase since 2013. Additionally, 84 percent of these employees also observed misconduct.
- Only one in five employees state that their company has a strong ethical culture, indicating that little progress has been made to implement the most important strategy for mitigating wrongdoing. Further, 40 percent of employees believe that their company has a weak or weak leaning ethical culture; a trend that has not notably changed since 2000.
“This latest update on the state of ethics and compliance sends a warning signal to every business leader,” Harned said. “Rather than taking comfort in the low levels of misconduct right now, leaders should be concerned that the situation will likely change.”
Highlights from Global Findings:
- India has the highest reporting of observed misconduct (82 percent); Russia has the lowest (37 percent)
- Indonesia has the highest rate of observed misconduct (48 percent); Japan has the lowest (15 percent)
- India has the highest rate of retaliation against employees (74 percent) China has the lowest (29 percent)
- Brazil has the highest rate of pressure to compromise ethical standards (46 percent); Spain has the lowest (10 percent)
The survey consists of data from two surveys, one focused exclusively on the United States, and another on global data. It includes responses from 5,000 U.S. employees and 18,000 global employees from 18 countries. The study identifies changes in the levels and types of observed misconduct in business organizations. It also measures employee patterns in reporting observed misconduct, perceptions of leader, strength of ethical cultures, and the extent to which retaliation is an issue in the workplace.