Many companies talk a good game about ethical culture. Stakeholders — including customers, shareholders, employees and regulators — expect them to have strong values and behave responsibly. Yet, corporate scandals still hit the headlines with relative frequency and organizations are facing a diverse set of risks. So, what do businesses really mean when they talk about ethical culture, and how do they maintain and embed it?
The answers to those questions will vary from one company to another, but one thing is for sure: A strong ethical culture doesn’t happen by accident. Corporate culture is a living thing that must be shaped, nurtured and reinforced over time. Companies need to decide what their values are and then create a framework around them, including clear policies, incentives, communications channels and, most importantly, training, so that everyone knows what is expected of them, understands how to deal with issues and can model ethical behavior in their day-to-day lives. In this way, ethics and compliance (E&C) can become part of an organization’s make up.
Business Benefits of E&C Training
Ethical culture matters. Creating a positive working environment, where everyone is treated with respect and fairness, is just good business sense. It allows employees to feel valued, safe and above all, empowered to speak up when things aren’t going well. Creating this type of culture is vital to spotting misconduct before it can escalate, and act decisively. Maintaining trust in your organization should be paramount.
LRN’s 2024 Benchmark of Ethical Culture report shows that ethical culture has a demonstrable impact on a company’s performance. They found that organizations with strong ethical cultures outperform those with weak ethical cultures by a margin of 50 percentage points across indicators such as customer satisfaction, business results, competitive positioning, employee loyalty, innovation and adaptability. Moreover, the gap is growing — three years ago the differential was 40%.
This is echoed by PwC’s “2022 Pulse Survey: CROs and Risk Management Leaders,” which suggests around one-third of risk executives (35%) see compliance and regulatory risk as the greatest threat to their company’s ability to drive growth. With all that in mind, companies have everything to gain from training their staff in E&C principles and how to put them into practice.
A good training program should not be static, instead it should be with the times, engaging and tailored for relevance. For instance, the course should present learning content at the right level, tailoring it for specific sectors and personalizing it where appropriate. If the training is adaptable to the learners, then they can be better prepared for an agile and complex business landscape, therein promoting a resilient organization.
LRN found that organizations with strong cultures are more than 2.6 times more likely to be adaptable than those with weak cultures.
Mitigating Misconduct: How to Create an Ethical Culture
Educating people about particular issues and their own personal responsibilities to prevent these issues can help mitigate unethical behavior. And if misconduct does happen, workers also need to know what to do if they see or suspect it. But it’s not an uncommon occurrence. According to Ethics & Compliance Initiative’s (ECI’s) “Global Business Ethics Survey,” in 2023 workplace misconduct hit a record high with nearly two-thirds (65%) of survey participants saying they observed “at least one act they deemed a violation to their organization’s standards or the law” in the past 12 months.
Research from LRN’s report found that out of the people who’ve witnessed misconduct in the workplace, approximately one-fifth failed to report it — a finding that echoes ECI’s results. Many employees are concerned if whether anything will be done or fear retaliation. However, according to the report, although fear of retaliation was a top barrier overall, it is less of a barrier for Gen Z workers (the generation of people born in the late 1990s and 2000s). Only 24% of Gen Z cited this as a reason compared to 46% of Baby Boomers (born after post-WW2).
An ethical culture accounts for an impressive 80% of the variation in whether employees feel they work in a psychologically safe environment. This is important because data from the report indicates that psychological safety is the strongest predictor of whether an employee will report misconduct. Illustrating the magnitude: for every unit increase in psychological safety, the likelihood of reporting misconduct increases by 2.4 times. Gallup highlights the role training can play in reporting rates: 72% of the employees who enjoyed the training strongly agree that their organization creates an environment where people can speak up.
Change starts at the top.
All levels of seniority within an organization should receive E&C Training, and should be tailored to approach the different pressures and perspectives of each job level. Leaders are responsible for setting the tone from the top. They must have the knowledge to escalate concerns and operationalize company policy downwards. And direct reports must be able to see why their individual efforts matter.
Since managers are often the first point of contact when an employee reports a problem, they must be ready to respond appropriately. Training should not only cover E&C processes and procedures, but also “soft” issues such as the effect of word choice, tone and body language.
Conducting regular, effective E&C training can demonstrate how serious a company is about promoting a healthy culture. These training opportunities can explain how to be proactive and supportive so employees can feel confident about how their manager will respond and react in the moment.
Learner Engagement in E&C Training
Organizations, who do not prioritize E&C training or recognize the benefits of having an ethical culture, must step up to the plate. Even if senior leaders believe the organization already has a strong ethical culture, it takes continuous learning and efforts to maintain it. In some cases, this can be an illusion. LRN’s report says senior leaders are 2.6 times more likely than front-line employees to say their organization has a strong ethical culture.
This disconnect may be down to wishful thinking, ivory-tower syndrome or a lack of visibility over what’s really happening on the ground. The best training programs can analyze program data and highlight areas for improvement or issues for concern, thereby enabling E&C professionals and C-suite to really feel the temperature of the business’s ethical culture. This highlights an opportunity companies have to better support managers in operationalizing organizational values more effectively.
And C-suite may not be aware of noncompliant behavior. Alarmingly, almost one-quarter of the report’s sample believe breaking company rules is acceptable if it’s necessary to get the job done, and 1 in 7 have engaged in behavior that violated their company’s code of conduct or standards in the past year. According to the research, Gen Z employees are the most likely to say do so, while remote workers were more inclined than on-site or hybrid workers to say they had engaged in misconduct or unethical behavior.
E&C training courses to consider.
These findings indicate that whether through inexperience or circumstances everyone in a company requires better E&C training, so they can stop standing on the sidelines of company culture and instead participate in mitigating risk and maintaining an ethical environment.
For all staff, areas of focus for training should include:
- Company codes of conduct.
- Anti-bribery and corruption.
- Anti-harassment and discrimination.
- Diversity, equity and inclusion (DEI).
- Data protection and privacy.
- Information security.
- Trade compliance.
- Securities and insider trading.
Some of these training courses are focused on educating people on legal requirements, and others are focused on the morality side of ethics. Both topics in E&C are important to tackle to ensure fairness and equitable treatment in the workplace, compliance to company rules, no criminal activity and an integral workforce.
For example, a DEI course can educate staff on unconscious bias and being culturally competent so people can respect and encourage different and diverse perspectives. On the other hand, data protection training can update staff on cybersecurity developments so they can identify hacking and phishing attempts.
When it comes to anti-bribery and corruption, it may be helpful to train people to spot the difference between legitimate business gifts and corporate entertaining and when preferments become a form of back-hander. This is the same for insider trading — staff need to when using their in-depth knowledge of the company becomes problematic.
Businesses often find that incorporating real-life examples of specific scenarios and a range of engaging formats (e.g., storytelling, visuals, humor) and interactive tools such as video, quizzes and roleplay can help preserve interest in the learning content and empower them to practice awareness, connecting the dots of how E&C relates to their role and to the community.
