The 2007 National Business Ethics Survey (NBES), published by the Ethics Resource Center (ERC) last November, based on a nationally representative survey of more than 3,000 employees of U.S. companies, both publicly and privately held and of varying sizes, indicates that ethical misconduct is back at pre-Enron levels.

The survey revealed the following key findings:

• High rates of misconduct. In the past 12 months, more than half (56 percent) of the employees surveyed observed conduct that violated company ethics standards, policy or the law. This matches the level (55 percent) reported in 2000, before Enron and other, more recent corporate scandals.
• Misconduct is more common in negative work environments. In companies where employees distrust management, ethical lapses abound.
• Management is often unaware of unethical behavior. In the latest survey, 42 percent of respondents said they do not report misconduct. Only 3 percent of all employees said they would prefer to use a company hotline rather than speak to someone they know.
• Only 1 in 4 companies has a well-implemented ethics and compliance program. Where such programs exist, only 29 percent of employees fail to report misconduct. In companies with no program, 61 percent do not speak up.
• Fear of retaliation. This is a primary reason why employees do not report unethical behavior. The survey found, however, that one out of eight employees who do report actually experienced retaliation. While any retaliation is a concern, far fewer experience it than fear it.

According to ERC President Patricia Harned, Ph.D., “Despite new regulation and significant efforts to reduce misconduct and increase reporting when it does occur, the ethics risk landscape in American business is as treacherous as it was before implementation of the Sarbanes-Oxley Act of 2002.”

“There is a strong sense of futility and fear among employees when it comes to reporting ethical misconduct, and that increases the danger to business. More than half (54 percent) of employees who witnessed but did not report misconduct believed that reporting would not lead to corrective action. More than a third (36 percent) of non-reporters feared retaliation from at least one source; but our research shows that having a strong ethical culture virtually eliminates retaliation.”

While employees at all levels appear not to have increased their “ethical courage” in recent years, Harned said, “the good news is that the rate of misconduct is cut by three-fourths at companies with strong ethical cultures, and reporting is doubled at companies with comprehensive ethics programs.”

In the post-Enron era, formal rules like The Sarbanes-Oxley Act will never be enough. Compliance alone does not substantially reduce risk. The challenge ahead is for corporate leaders to help employees move beyond feelings of futility and fear of retaliation towards empowerment and find the ethical courage to do what is right.

The complete NBES survey is available at www.ethics.org