The good news is that the amount of misconduct occurring in the workplace is at an all-time low. So is the pressure on employees to engage in any kind of wrongdoing. The bad news is that the level of retaliation against workers who report the misbehavior that does occur remains alarmingly high. This comes out of the latest National Business Ethics Survey by the Ethics Resource Center (ERC). It is the eighth in a series of surveys ERC has conducted since 1994 to measure ethics and compliance in the American workplace.
According to the ERC survey, roughly 41 percent of employees observed fraud or misconduct this past year. While that may seem high, it actually is the lowest level ERC has ever reported, down from the 45-percent figure it reported two years ago and the record 55 percent it reported six years ago. Following this favorable trajectory, ERC also found that the pressure workers felt to engage in misconduct or otherwise compromise their ethical standards dropped to 9 percent this past year (down from the 13 percent ERC reported in 2011). Since this pressure to compromise can be a powerful indicator of future misconduct, the four-point drop reaffirms the overall ERC finding that we seem to be heading in the right direction when it comes to workplace ethics.
But there are two major areas which remain of serious concern and significantly color this otherwise rosy outlook. First, with respect to the misconduct that was reported last year, a relatively high percentage of it (60%) was committed by managers. What is worse, nearly a quarter (24%) of it was committed by senior managers. These are the very individuals charged with leading by example and ensuring their employees comply with the law and all company rules. This presents a rather inauspicious portrayal of this country’s business leadership and adds fuel to the growing fury that top executives are rarely held accountable for their corporate transgressions.
Second, and even more troubling, the percentage of employees who were willing to report the misconduct they observed remained stagnant, and the retaliation against those who did report it continued at record levels. The survey found 63 percent of those who witnessed corporate wrongdoing reported it, slightly down from the 65 percent who reported it in 2011. And of those reporting, more than one in five of them (21%) were retaliated against for doing so. While this is basically the same whistleblower retaliation rate reported in 2011, it is a significant jump from the 15-percent rate the ERC found in 2009, and the 12-percent rate it found only two years before that.
This level of whistleblower retaliation continues to present a strong disincentive for would-be whistleblowers to say something when they see something. Forget about all the new protections and incentives in the ever-expanding array of anti-fraud and whistleblower laws. And forget about the potential for riches for uncovering the next nine- or ten-figure mega-fraud. None of it is going to matter if these potential upsides are cancelled out by a growing threat of serious retaliation. No one really wants to be a whistleblower in the first place. It is a long, lonely and tiresome ride that can have devastating effects on both career and family. Throw in a real threat of retaliation (which can often include physical or mental abuse) and all but the most driven, daring or reckless, are going to keep their heads in the sand, no matter the wrongdoing they may witness.
As foreboding as these stubbornly high retaliation rates are for future whistleblowers, they are equally disquieting for the companies that employ them. That is because the absolute worst thing a company can do to fend off the potential exposure from those whistleblowers willing to step forward is to operate in a climate that discourages and punishes them for doing so. As the ERC survey confirmed (yet again), the vast majority of whistleblowers— roughly 90 percent—have no interest in reporting to the government. Instead, they strongly prefer to work within the company to expose and attempt to remedy the fraud. It is only when they have been frustrated in this endeavor that they feel compelled to bring their grievances to the government.
Of course, nothing is going to send a whistleblower to the government (and potentially the press) faster than being rebuffed or retaliated against for trying to help the company root out fraud. And once the government (or press) gets involved, the risk of serious sanctions (and embarrassment) for the company goes up sharply. Retaliation not only pushes the whistleblower to report to the government. It drives others there as well, knowing full well their gripes are not welcome on the inside. Notably, the possibility of a financial award (provided under the False Claims Act and Dodd-Frank whistleblower provisions) came in at the bottom of the ERC list for what ultimately drives whistleblowers to go to the government.
The bottom line takeaway from all of this is that while corporate misconduct may be receding, whistleblower retaliation is as virulent as ever and companies should do their utmost to curb this stubborn plague. First and foremost, this means creating a culture of honesty, openness and strong business ethics. It also means educating managers and staff on the importance of internal reporting; providing easy channels for employees to do so; offering real protections for those that do; addressing their complaints quickly and decisively; and employing a clear and visible zero-tolerance policy for whistleblower retaliation. Otherwise, if the frequency and severity of retaliation continues on its present course, it is not just the whistleblowers who will feel the pain.
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