Why corporate integrity is more crucial now than ever

The EY Global Integrity Report 2020 reveals a divide in perceptions between management and junior employees about unethical behavior.

Integrity is more important today than it has ever been. As companies anticipate and respond to current challenges, such as by changing suppliers and shifting priorities, it’s essential that compliance standards are upheld. If they’re not, companies are exposing themselves to major risk.

In times of crisis, personal conduct can be the first standard to slip, evidenced by the latest insights gleaned from thousands of companies that participated in our Global Integrity Report 2020 (pdf).

Organizations are not machines. They are complex systems made up of humans with individual instincts and behaviors that are influenced by their environment. “Understanding the people who make up your organization and the environment in which they operate is critical to protect against unethical conduct,” says Stefan Heissner, EY EMEIA Forensic & Integrity Services Leader.

Inside the numbers

Thirty-five percent of respondents to our survey believe that unethical behavior in their organization is often tolerated when the people involved are senior or high performers. This figure increases to 41% for the senior manager respondents. Furthermore, 46% of respondents believe that there are managers in their organization who would sacrifice integrity for short-term financial gain. This figure increases to 51% for the senior manager cohort.

Our research finds that the more senior an employee, the more likely they would be to act unethically. Senior employees are more likely to justify unethical behavior such as ignoring unethical conduct in their team, misleading external parties such as auditors or regulators or offering/accepting a bribe in order to boost their own career progression or remuneration. This is concerning as leaders set the tone at the top and define standards of behavior for their organizations.

Those employees who believe they demonstrate the highest levels of integrity have more confidence in their past conduct. Therefore, with over half (51%) of all respondents concerned if information about their work decisions came under public scrutiny, COVID-19 and the ensuing economic crisis will undoubtedly uncover their unethical behavior and actions. This leaves companies wide open to the threat of reputational damage, especially considering how large our digital footprint is — decisions, statements and social media posts, for example, are all preserved electronically.

Well over half (59%) of respondents say that it is challenging for organizations to maintain their standards of integrity in periods of rapid change or difficult market conditions. This figure rises to 63% for those in emerging markets.

Such findings paint an ominous picture, even pre-COVID-19. Now that companies are under extreme pressure to survive, ethical standards may slip even further. In times of trouble, a deep commitment to measuring and monitoring personal and corporate integrity is more important than ever.

Furthermore, a fifth (21%) of respondents in our follow-up survey in April 2020 believe that ethical business conduct will decrease due to COVID-19.

Five things you need to know about employees’ view of organizational culture

EY research shows a striking mismatch between the way management and junior employees1 perceive the actions of leadership, and the values of their organization. Of course, just because junior employees believe something is happening, it doesn’t mean it is. But perception is powerful, and the key is to understand why.

1. Junior employees fear personal consequences for reporting wrongdoing. Only 58% of junior employees agree that employees in their organization can report wrongdoing at work without fear of negative consequences for themselves. In contrast, 70% of board members agree. Management must build the trust of their workforce through clear communication of values and transparent compliance with the rules, and provide secure ways in which employees can voice their concerns.
   
   
2. Management doesn’t talk enough about integrity. Two-thirds (67%) of the board think management frequently talks about the importance of behaving with integrity, but only 37% of junior employees think the same. Management must talk about integrity to the wider organization, engaging employees on the issue.
   
   
3. Junior employees doubt standards of integrity are improving. Fifty-eight percent of junior employees believe the standard of integrity at their company has stayed the same or has become worse, but 71% of the board think standards have improved. Companies must work hard to make tangible improvements to their integrity standards that can be felt internally across the organization.
   
   
4. Managers are believed to let high performers get away with unethical behavior. A third (32%) of junior employees believe unethical behavior is tolerated if the culprits are senior or high performers. In fact, a similar proportion (34%) of the board agrees. Misconduct should not be tolerated at any level.
   
   
5. Junior employees do not believe management operates with integrity. Sixty percent of junior employees are not very confident that their managers demonstrate professional integrity. Meanwhile, the majority (55%) of board members are very confident they do. Management must always demonstrate integrity and lead by example.

How to protect against personal misconduct with integrity

Actions to take now include:

• Assess your current compliance framework — is it fit for purpose as the risk landscape evolves, does it influence individuals’ behavior and is it adequately resourced?
  
  
• Probe the attitudes of your people about the risks and pressures to do the wrong thing and strengthen channels for employees to confidentially report cases of misconduct without fear of retaliation
  
  
• Take personal responsibility for your own professional actions, whether scrutinized or not.  Senior employees should lead by example to create a culture of integrity
  
  
• Conduct root cause analyses of misbehavior rather than treating symptoms, and understand the dynamics of the social environment shaping unethical behavior
  
  
• Develop policies and procedures that influence individual behavior at all levels and reinforce with tailored training and communications
  
  
• Use data to obtain measurable insights on actual behaviors in your organization. 

This article is one in a series based on the Global Integrity Report 2020 (pdf). For a comprehensive approach to maintaining integrity, please see the other articles in the series, accessible below:

1. Foster trusting partnerships with third parties based on integrity
2. Safeguard data while ethically leveraging its value