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Workers should be wary of shady business deals

Even with the news coverage just a few years ago surrounding the Enron scandal, the corporate crookedness of the past may be destined to repeat itself, based on a new business-ethics study.

Do you remember the Enron scandal and the whistleblower at the energy company Sherron Watkins, who was even named Time person of the year in 2002?

Seems like many employees and managers have forgotten her heroism and they’ve also forgotten the many ethical lapses among businesses just a few years ago epitomized by Enron.

The corporate crookedness of the past may be destined to repeat itself based on a new business ethics study.

A biennial survey recently released by the Ethics Resource Center found that 56 percent of employees observed some kind of misconduct that either violated company ethics standards or the law, and many saw multiple violations. And among those who observed the ethical lapses 42 percent of those polled did not report the missteps. But, it turned out, women are more likely to report misdeeds than men.

"The ethics risk landscape for American business is as bad as it was before Enron," says Patricia Harned, president of the Center that has been conducting the study since 1994. "And furthermore there is no increase in ethical courage among employees in U.S. companies. In other words, there is an ethics crisis in American business."

There were improvements in ethical behavior and reporting of dishonorable deeds right after Enron and a host of other major corporations crashed and burned because of major fraud issues, but alas those gains have all but disappeared, according to the data.

The ethical issues employees have observed were not merely stealing pens or paper clips.

The top three types of observed are: Conflicts of interest; putting one’s own interests above the organization; abusive or intimidating behavior; and lying to employees.

Six years ago, Sarbanes-Oxley was passed in response to scandals at Enron, Tyco and WorldCom, to name a few, to help fight corporate and accounting corruption and make it easier for employees to report misdeeds. But the act seems to have done little to curb unethical behavior. One provision was that companies put in whistleblower hotlines so individuals could rat out their colleagues and bosses. Alas, workers don’t appear to be falling all over themselves to report the bad guys.

There are several reasons why they’re keeping mum, and futility and fear are at the top of the list. About 54 percent of those polled said they figured corrective action would not be taken even if they reported the problem; and 36 percent feared retaliation. And it turned out the hotlines were rarely used by employees, only 3 percent of the time. Most wanted to talk to a live human being, preferably a supervisor, to report any misconduct.

Maybe it’s just human nature that keeps us from blowing the whistle.

"We have this idea that we should be tolerant of other and other peoples views. That we should never speak out and criticize when we see someone is doing something wrong," says James Otteson, professor of philosophy and economics at Yeshiva University. "People increasingly keep their mouths shut even if people are lying, dishonest, or stealing. People think, 'it’s not my place.'"

If it’s a minor ethical breach many people tend to brush it aside, says Francesca Gino, visiting assistant professor of organizational behavior at the Tepper School of Business at Carnegie Mellon.

Gino, who co-authored the study, "Slippery Slopes and Misconduct: The Effect of Gradual Degradation on the Failure To Notice Others' Unethical Behavior," believes unethical behavior is not always a product of intention. "When changes are very small we tend to fail to see them. As a result, we might engage in unethical behavior," she explains.

For example, she adds, if you take one piece of paper home today and another home the next day, no one will notice what you’re doing. Now, if you take home two packages of paper, that’s a warning sign.

These minor infractions, she says, can start to erode behavior. "Once the ethical line has been crossed, an institutionalization of corruption can occur in which unethical acts become a common part of daily activities and people often have a vested interest in remaining quiet," she says.

Jeffrey Kaufmann, an assistant professor of management at Iowa State University, studied the behavior of nearly 50 students from another midwestern university who had cheated on a take-home exam and found they were able to do so because they distanced themselves from their actions and rationalize their behavior.

But, he adds, the rise in unethical acts today may be more a function of economic uncertainty.

"Most people are concerned about job loss, the price of oil, etc.," he explains. "When people get insecure, there's more of a temptation to cut corners — to try and get that little bit extra."

One interesting finding in the Ethics Resource Center study was that women seemed to have a higher ethical calling. When asked if they reported observed misconduct, 64 percent of women said they had, while only 54 percent of men did.

"Women think about ethics much more in terms of relationships," says the Center’s Harned. "Women are more concerned about what harm will be done to someone else if they don’t report misconduct. That’s how they’re wired."

On a positive note, the fact that more people are reporting unethical behavior may be a sign that companies are indeed doing a better job making it clear to employees what is inappropriate, says Richard Cellini, vice president of Integrity Interactive, a company that provides businesses with ethics policy tools. “An upsurge in incidences reported is in response to robust training and a robust code of employment,” he adds.

The problem Cellini sees is middle managers that don’t have the power or the tools to deal with these issues when they do come up.

Here are some tips for employees and managers from Mitchell Kusy, co-author of a "Manager’s Desktop Consultant: Just-in-Time Solutions to the Top People Problems That Keep You Up at Night."

Determine if the act is indeed unethical by using this 3-step checklist:

  1. Is it legal or at least a non-violation of company policy?
  2. Is it fair and balanced?  Are people being treating fairly in both the short and long term?
  3. How will I feel if I do nothing? If I act?

Then assess whether your actions will affect your career by revisiting number three above. “If you're going to feel horrible for either doing/not doing something, your career may not matter,” he says.

Don't "catastrophize."

"Acting ethically is rarely a career-destroyer," he notes. "While it certainly can happen, your own worth may be more important than working within a specific organization that promotes unethical behaviors.”

And, he points out, jobs are increasingly more plentiful today. “So, while it could affect your career within the organization (and it always depends on the organization), it is less likely it will affect your career in other organizations."

And if you’re the one possibly engaged in unethical behavior, you can also use the 3-step test.

"Depending upon your answers, you may want to validate this with someone else you trust," he says. "Obviously, if you discover that it's illegal or violates company policy, you could be liable."

But nothing is clear-cut. "It will be something that is in a gray area," he adds, "because if you're asking this question, you probably have a good conscience that is operating in full swing here."