New Research Reveals Business Impact of Ethics, Signals Importance of Ethical Corporate Cultures

Strong Ethical Reputations Provide Competitive Advantage in the Marketplace,

Yet Those Reputations Are at Risk in the Workplace, Study Finds



Jan 30, 2006, 00:00 ET from LRN

    LOS ANGELES, Jan. 30 /PRNewswire/ -- In the marketplace, corporate ethical
 reputations have a clear impact on the purchasing and investment decisions of
 Americans, but ethical lapses in the workplace put those reputations at risk,
 according to independent research released today by LRN, a premier provider of
 legal, compliance, ethics management and corporate governance solutions.
     The results, based upon telephone interviews with more than 2,000 U.S.
 adults as part of the Opinion Research Corporation CARAVAN(R) omnibus survey,
 suggest organizations have a significant incentive to safeguard ethical
 reputations and strengthen the ethical health of their corporate cultures for
 business advantage.
     "LRN has long believed that corporate cultures that self govern based upon
 the highest standards of ethical behavior help businesses outperform their
 peers.  We've seen evidence of this within our own customer base," said LRN
 CEO and chairman Dov Seidman.  "Ethical cultures create trust within and
 outside corporations.  Trust encourages appropriate risk taking, which leads
 to innovation, which propels progress-and ultimately profitability."
 
     Specifically, survey findings indicate:
      *  Half (50 percent) of Americans who own stocks independent of a 401(k)
         have at some point decided not to purchase stock in a company because
         they believed it had questionable ethics.
      *  Seven in 10 Americans (70 percent) have at some point decided not to
         purchase products or services from a company because of questionable
         ethics.
      *  Nearly half (48 percent) of employed Americans have been in a
         situation in which they had to make a choice between what they felt
         was right and what their supervisor expected them to do.
      *  The majority (77 percent) sought guidance in resolving these ethical
         dilemmas.
 
     Ultimately, almost half (49 percent) did what they initially felt was the
 right thing to do, while 30 percent worked out a compromise, and almost one in
 10 did what their supervisor asked despite personal misgivings.
 
     Ethical Reputations in the Marketplace
     Many Americans place a higher value on a corporation's ethical reputation
 than on its financial performance or the costs of its products, the study
 found.  In fact, only 15 percent of survey respondents who owned stocks
 independent of a 401(k) said they would purchase stock in a company that had
 performed well financially but made bad ethical decisions.  Half of
 respondents who owned stock independent of a 401(k) had already at some point
 decided not to purchase stock in a company because they knew of questionable
 ethical actions by the company's management or employees.
     Corporate ethics also influence purchases.  Seventy-two percent of
 respondents said they preferred to purchase products and services from a
 company with ethical business practices and higher prices, rather than from
 one with questionable business practices and lower prices.  Only 18 percent
 indicated they preferred the opposite.  Seventy percent of all respondents had
 already at some point decided not to purchase products or services from a
 company because they believed it had questionable ethics.
     Interestingly, 23 percent of respondents younger than 35 said they would
 purchase stock in a company that had performed well financially but made bad
 ethical decisions, compared to 12 percent of adults older than 35.  Men
 (19 percent) were also more likely than women (11 percent) to invest in a
 company with solid financial performance but questionable past ethics.
     Younger respondents, those with lower incomes, and respondents with less
 education were more likely to value low prices over ethical business
 practices.  Forty percent of 18- to 24-year-olds preferred to purchase
 products and services from a company with questionable business practices and
 lower prices rather than the opposite; 32 percent of those with annual incomes
 under $25,000; and 28 percent of those with a high school education or less.
 
     Ethical Dilemmas in the Workplace
     Survey results indicated that companies enjoying the marketplace benefits
 of ethical reputations may find those reputations are less secure than they
 think.
     Nearly half (48 percent) of employed respondents said they had been in a
 situation in which they had to make a choice between what they felt was right
 and what their supervisor expected them to do.  Are employees and supervisors
 just not clear on ethical standards in the workplace?  On the contrary, the
 vast majority -- 89 percent -- of respondents said they had a clear
 understanding of their employer's expectations for ethical standards.
 
     Respondents took varying approaches to resolving ethical dilemmas, with
 three out of four (77 percent) seeking guidance from others:
      *  55 percent from supervisors;
      *  43 percent from colleagues and peers;
      *  41 percent from friends and family outside work; and
      *  Only 17 percent through formal assistance channels, such as human
         resources.
 
     One in five (21 percent) made the decision on their own.  Adults 45 and
 older were more likely than younger adults to have made a decision without
 help (28 percent versus 15 percent of younger adults).
     "It's encouraging that employees are talking to others," Seidman observed.
 "In a healthy culture, you should be able to turn to the person in the cube
 next to you and find help and support for doing the right thing.  At the same
 time, companies need to be sure employees are turning to informed sources so
 that the right decisions are being made, and productivity is not constrained."
 
     Ultimately, of the respondents faced with an ethical dilemma:
      *  49 percent said they did what they initially thought was right;
      *  30 percent worked out a compromise with supervisors;
      *  Eight percent determined that what their supervisors requested was
         appropriate and carried it out; and
      *  Nine percent -- almost one in 10 -- did what their supervisors asked
         despite personal misgivings, a significant ethical risk that
         multiplies with a corporation's employee population.
 
     Institutionalizing Ethical Cultures
     LRN has worked with more than 200 companies to help foster and fortify
 strong ethical cultures as a foundation for winning in the marketplace.  "Our
 clients have committed substantial resources to cultivating ethical cultures.
 Beyond setting corporate expectations for behavior, they are working to
 inspire, educate and empower each and every employee to do the right thing
 every day," Seidman said.  "These companies understand the power of culture in
 transforming business."
 
     Though ethical cultures don't develop overnight, Seidman offers four
 foundational suggestions to help executives foster ethical cultures within
 their organizations:
 
      1.  Focus on "how" not just on "what" you do.  Across industries,
          competition is driving organizations to differentiate themselves not
          just by their products and services, but by how they sell, how they
          partner, how they deal with customers, and more.  Tapping the best of
          human behavior yields distinct advantages.  In practical terms, this
          means going beyond what is expected and refusing to imperil the
          company's reputation for short-term gain.
      2.  Ensure ethical leadership at every level.  In a 2005 survey by Walker
          Information, only 58 percent of employees said their senior leaders
          were ethical.  "Tone at the top" is no longer enough.  Acting
          ethically is everyone's responsibility and needs to be emphatically
          reinforced and rewarded within and beyond the walls of an
          organization.  A company's reputation is only as strong as the
          weakest member of its supply chain, including vendors, partners, and
          ventures.  It's important to engage this broader community in a
          commitment to ethical standards.
      3.  Systemize your approach.  Just as 50 years ago, organizations did not
          know how to manage and measure quality and safety within the
          enterprise, companies today struggle with the management and
          measurement of ethics, particularly within large, multinational,
          multi-jurisdictional companies.  A business process approach enables
          companies to not only define the ethics and compliance risks they
          face on a global basis, it allows them to address and manage those
          risks in a holistic way to ensure strong ethical health.  Training
          alone is insufficient -- an estimated 69 percent of U.S. companies
          already provide ethical training to employees, according to a 2005
          survey by the Ethics Resource Center.
      4.  Leverage technology to ensure efficiency and effectiveness.  Without
          a platform to capture, manage, extract and access data, individuals
          are the gatekeepers of information and knowledge, and companies are
          limited in their ability to assess program status, share best
          practices, perform benchmark analyses and quickly generate reports
          for management review.  New technologies better inform an
          organization's governance, risk and compliance efforts by enabling
          real-time executive insight into the ethical health of the
          organization.
 
     About Opinion Research Corporation
     Founded in 1938, Opinion Research Corporation provides commercial market
 research, health and demographic research for government agencies, information
 services, teleservices and consulting. The company is a pioneering leader in
 the science of market and social research, and has built a worldwide
 data-collection network.
 
     About LRN
     LRN provides governance, ethics and compliance management solutions that
 inspire, reinforce and set higher standards for ethically aware, responsible
 conduct in organizations throughout the world. The company works with more
 than 200 leading companies, including The Dow Chemical Company, DuPont,
 Johnson & Johnson, Pfizer, Proctor & Gamble and Raytheon.  The LRN Governance
 and Ethics Management System(TM) (GEMS(TM)) offers global corporations an
 integrated solution for corporate governance, risk, ethics and compliance
 management. GEMS(TM) includes the flagship Legal Compliance and Ethics
 Center(TM) (LCEC(R)), a web-based education solution. LCEC(R) offers more than
 200 courses, covering more than 3,600 topics, and has helped millions of
 employees around the world act more responsibly, work more productively and
 become better informed about the laws and values that govern their day-to-day
 decision-making. The company's decade-long record in Expert Legal Research and
 Analysis delivers un paralleled legal research at significant cost savings to
 leading legal departments around the world.  More information is available at
 www.lrn.com
 
 

SOURCE LRN
    LOS ANGELES, Jan. 30 /PRNewswire/ -- In the marketplace, corporate ethical
 reputations have a clear impact on the purchasing and investment decisions of
 Americans, but ethical lapses in the workplace put those reputations at risk,
 according to independent research released today by LRN, a premier provider of
 legal, compliance, ethics management and corporate governance solutions.
     The results, based upon telephone interviews with more than 2,000 U.S.
 adults as part of the Opinion Research Corporation CARAVAN(R) omnibus survey,
 suggest organizations have a significant incentive to safeguard ethical
 reputations and strengthen the ethical health of their corporate cultures for
 business advantage.
     "LRN has long believed that corporate cultures that self govern based upon
 the highest standards of ethical behavior help businesses outperform their
 peers.  We've seen evidence of this within our own customer base," said LRN
 CEO and chairman Dov Seidman.  "Ethical cultures create trust within and
 outside corporations.  Trust encourages appropriate risk taking, which leads
 to innovation, which propels progress-and ultimately profitability."
 
     Specifically, survey findings indicate:
      *  Half (50 percent) of Americans who own stocks independent of a 401(k)
         have at some point decided not to purchase stock in a company because
         they believed it had questionable ethics.
      *  Seven in 10 Americans (70 percent) have at some point decided not to
         purchase products or services from a company because of questionable
         ethics.
      *  Nearly half (48 percent) of employed Americans have been in a
         situation in which they had to make a choice between what they felt
         was right and what their supervisor expected them to do.
      *  The majority (77 percent) sought guidance in resolving these ethical
         dilemmas.
 
     Ultimately, almost half (49 percent) did what they initially felt was the
 right thing to do, while 30 percent worked out a compromise, and almost one in
 10 did what their supervisor asked despite personal misgivings.
 
     Ethical Reputations in the Marketplace
     Many Americans place a higher value on a corporation's ethical reputation
 than on its financial performance or the costs of its products, the study
 found.  In fact, only 15 percent of survey respondents who owned stocks
 independent of a 401(k) said they would purchase stock in a company that had
 performed well financially but made bad ethical decisions.  Half of
 respondents who owned stock independent of a 401(k) had already at some point
 decided not to purchase stock in a company because they knew of questionable
 ethical actions by the company's management or employees.
     Corporate ethics also influence purchases.  Seventy-two percent of
 respondents said they preferred to purchase products and services from a
 company with ethical business practices and higher prices, rather than from
 one with questionable business practices and lower prices.  Only 18 percent
 indicated they preferred the opposite.  Seventy percent of all respondents had
 already at some point decided not to purchase products or services from a
 company because they believed it had questionable ethics.
     Interestingly, 23 percent of respondents younger than 35 said they would
 purchase stock in a company that had performed well financially but made bad
 ethical decisions, compared to 12 percent of adults older than 35.  Men
 (19 percent) were also more likely than women (11 percent) to invest in a
 company with solid financial performance but questionable past ethics.
     Younger respondents, those with lower incomes, and respondents with less
 education were more likely to value low prices over ethical business
 practices.  Forty percent of 18- to 24-year-olds preferred to purchase
 products and services from a company with questionable business practices and
 lower prices rather than the opposite; 32 percent of those with annual incomes
 under $25,000; and 28 percent of those with a high school education or less.
 
     Ethical Dilemmas in the Workplace
     Survey results indicated that companies enjoying the marketplace benefits
 of ethical reputations may find those reputations are less secure than they
 think.
     Nearly half (48 percent) of employed respondents said they had been in a
 situation in which they had to make a choice between what they felt was right
 and what their supervisor expected them to do.  Are employees and supervisors
 just not clear on ethical standards in the workplace?  On the contrary, the
 vast majority -- 89 percent -- of respondents said they had a clear
 understanding of their employer's expectations for ethical standards.
 
     Respondents took varying approaches to resolving ethical dilemmas, with
 three out of four (77 percent) seeking guidance from others:
      *  55 percent from supervisors;
      *  43 percent from colleagues and peers;
      *  41 percent from friends and family outside work; and
      *  Only 17 percent through formal assistance channels, such as human
         resources.
 
     One in five (21 percent) made the decision on their own.  Adults 45 and
 older were more likely than younger adults to have made a decision without
 help (28 percent versus 15 percent of younger adults).
     "It's encouraging that employees are talking to others," Seidman observed.
 "In a healthy culture, you should be able to turn to the person in the cube
 next to you and find help and support for doing the right thing.  At the same
 time, companies need to be sure employees are turning to informed sources so
 that the right decisions are being made, and productivity is not constrained."
 
     Ultimately, of the respondents faced with an ethical dilemma:
      *  49 percent said they did what they initially thought was right;
      *  30 percent worked out a compromise with supervisors;
      *  Eight percent determined that what their supervisors requested was
         appropriate and carried it out; and
      *  Nine percent -- almost one in 10 -- did what their supervisors asked
         despite personal misgivings, a significant ethical risk that
         multiplies with a corporation's employee population.
 
     Institutionalizing Ethical Cultures
     LRN has worked with more than 200 companies to help foster and fortify
 strong ethical cultures as a foundation for winning in the marketplace.  "Our
 clients have committed substantial resources to cultivating ethical cultures.
 Beyond setting corporate expectations for behavior, they are working to
 inspire, educate and empower each and every employee to do the right thing
 every day," Seidman said.  "These companies understand the power of culture in
 transforming business."
 
     Though ethical cultures don't develop overnight, Seidman offers four
 foundational suggestions to help executives foster ethical cultures within
 their organizations:
 
      1.  Focus on "how" not just on "what" you do.  Across industries,
          competition is driving organizations to differentiate themselves not
          just by their products and services, but by how they sell, how they
          partner, how they deal with customers, and more.  Tapping the best of
          human behavior yields distinct advantages.  In practical terms, this
          means going beyond what is expected and refusing to imperil the
          company's reputation for short-term gain.
      2.  Ensure ethical leadership at every level.  In a 2005 survey by Walker
          Information, only 58 percent of employees said their senior leaders
          were ethical.  "Tone at the top" is no longer enough.  Acting
          ethically is everyone's responsibility and needs to be emphatically
          reinforced and rewarded within and beyond the walls of an
          organization.  A company's reputation is only as strong as the
          weakest member of its supply chain, including vendors, partners, and
          ventures.  It's important to engage this broader community in a
          commitment to ethical standards.
      3.  Systemize your approach.  Just as 50 years ago, organizations did not
          know how to manage and measure quality and safety within the
          enterprise, companies today struggle with the management and
          measurement of ethics, particularly within large, multinational,
          multi-jurisdictional companies.  A business process approach enables
          companies to not only define the ethics and compliance risks they
          face on a global basis, it allows them to address and manage those
          risks in a holistic way to ensure strong ethical health.  Training
          alone is insufficient -- an estimated 69 percent of U.S. companies
          already provide ethical training to employees, according to a 2005
          survey by the Ethics Resource Center.
      4.  Leverage technology to ensure efficiency and effectiveness.  Without
          a platform to capture, manage, extract and access data, individuals
          are the gatekeepers of information and knowledge, and companies are
          limited in their ability to assess program status, share best
          practices, perform benchmark analyses and quickly generate reports
          for management review.  New technologies better inform an
          organization's governance, risk and compliance efforts by enabling
          real-time executive insight into the ethical health of the
          organization.
 
     About Opinion Research Corporation
     Founded in 1938, Opinion Research Corporation provides commercial market
 research, health and demographic research for government agencies, information
 services, teleservices and consulting. The company is a pioneering leader in
 the science of market and social research, and has built a worldwide
 data-collection network.
 
     About LRN
     LRN provides governance, ethics and compliance management solutions that
 inspire, reinforce and set higher standards for ethically aware, responsible
 conduct in organizations throughout the world. The company works with more
 than 200 leading companies, including The Dow Chemical Company, DuPont,
 Johnson & Johnson, Pfizer, Proctor & Gamble and Raytheon.  The LRN Governance
 and Ethics Management System(TM) (GEMS(TM)) offers global corporations an
 integrated solution for corporate governance, risk, ethics and compliance
 management. GEMS(TM) includes the flagship Legal Compliance and Ethics
 Center(TM) (LCEC(R)), a web-based education solution. LCEC(R) offers more than
 200 courses, covering more than 3,600 topics, and has helped millions of
 employees around the world act more responsibly, work more productively and
 become better informed about the laws and values that govern their day-to-day
 decision-making. The company's decade-long record in Expert Legal Research and
 Analysis delivers un paralleled legal research at significant cost savings to
 leading legal departments around the world.  More information is available at
 www.lrn.com
 
 SOURCE  LRN