Fall 2015 Issue of Horizons

LIFE SCIENCES & TECHNOLOGY

Another example is that in large organizations with strong ethical cultures and effective compliance programs, the likelihood of misconduct being reported increases from 32% (in weaker cultures) to 87% (in stronger cultures). While it is not easy or often practical to quantify these benefits in economic terms, it is easy to see the benefits in terms of the decreased risks your organization faces. Decreased risk of financial reporting fraud, asset misappropriation and reputational damage are real benefits organizations can obtain by creating, enhancing and maintaining a strong ethical culture. Turning an Ideal Into an Asset First and foremost, developing a strong ethical culture (or enhancing an existing one) should be a top priority within organizations. How is this done? It starts at the top. ∙ Leadership needs to set the expectations and lead by example. When leadership promotes and models ethical behavior and value systems, the culture and positive effects will flow down throughout the organization. ∙ Leadership has a significant impact on the ultimate effectiveness of ethics programs and the perception of ethical behavior throughout an organization. Leaders truly set the tone at the top in establishing an ethical culture. ∙ The organization should be documenting, in its formal policies and procedures, its expectations for ethical behavior, compliance with laws and regulations and workplace conduct. ∙ Organizations should provide regular, recurring training on ethical standards and expectations. Training should ensure that an organization’s personnel understand what the standards are and how compliance and oversight mechanisms work.

In a ‘weak’ ethical culture, ethical values aren’t promoted and ‘getting the job done’ is far more important than getting the job done in the ethically right way. Basically, the strength of a company’s ethical culture is the extent to which the organization makes doing the right thing a priority.” Benefits of a Strong Ethical Culture An asset is property that has value because it is expected to generate real economic benefits now or in the future. This is true for both tangible and intangible assets. Establishing and promoting a strong ethical culture can create real benefits for organizations. According to the ERC, some of the observed benefits associated with having a strong ethical culture include: ∙ Reduced pressure to compromise standards – “In stronger cultures, far fewer employees (4%) feel pressure to commit misconduct than in weaker cultures (15%).” ∙ Lower rates of observed misconduct – “Rates of observed misconduct in stronger cultures are roughly half (39%) as high as in weaker cultures (76%).” ∙ Increased likelihood of misconduct being reported – “In stronger as opposed to weaker ethical cultures, failure to report observed misconduct declines by more than a third, from 43% to 28%.” ∙ Lower retaliation rates – “The retaliation rate in stronger ethical cultures is 4%, compared to 24% in weaker cultures.” These benefits are even more pronounced in the largest organizations (over 90,000 employees). For example, pressure to commit misconduct was more than seven times greater in weaker ethical cultures compared with strong cultures and programs (23% versus 3%).

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