HR feeling pressure to act unethically

More than half under the gun to act improperly, according to a new study

Enron may have pushed business ethics to the front pages and therefore to the front burner at many organizations, but more than half of HR professionals have been pressured to act unethically in the last year, according to a new survey.

Of the 462 American HR professionals surveyed by the Society for Human Resources Management (SHRM), 52 per cent said they felt at least some pressure to compromise their organization’s ethical standards. That’s up from 47 per cent in a similar poll six years ago.

Asked what caused them to act unethically, respondents to the study 2003 Business Ethics Survey most often cited a need to follow the boss’ orders (49 per cent); pressure to meet overly aggressive business objectives (48 per cent); and helping the organization survive (40 per cent). Also mentioned frequently was pressure to be a “team player.”

David Forman, chief ethics officer at SHRM, said he was surprised that after the high profile corporate scandals of the last 18 months so many HR professionals still feel pressed to compromise on ethical standards.

“I would have hoped that HR people would have seen less pressure for compromising their ethical standards. I would have liked to see that improve. But evidently we are getting more pressure,” he said. “The cover of the book may change but the book stays the same.”

The study also confirms HR professionals are playing an integral role in ensuring ethical practices are defined and followed.

Most HR professionals, (69 per cent) said they are a “primary resource” for ethics policies. However, much of this involvement appears to be reactive since many respondents (40 per cent) said they are not part of the “ethics infrastructure” but are instead called in to clean up any messes.

Although more than half of respondents said they felt at least some pressure to violate ethics, only about one-third (35 per cent) said they actually observed misconduct in the previous 12 months as compared to 53 per cent in 1997.

The most common types of misconduct observed was misreporting hours of work, employees lying to supervisors, management lying to employees, customers, vendors or the public, misusing the organization’s assets, and lying on reports or falsifying records.

Susan Meisinger, president of SHRM, said HR professionals have a unique role to play when it comes to corporate ethics. “HR must do more than clean up the mess after the damage has been done. They have a responsibility to step up and ensure that their organizations maintain cultures that demand ethical behaviour.”

Ethical issues are by definition people issues, so HR has a singularly important role to play, said Forman.

“A lot of unethical behaviour is the result of human behaviour and interactions. You don’t commit ethical violations against a tube of toothpaste and they do not involve machinery in a factory. Ethical violations usually involve people doing things that are inappropriate,” said Forman. “I think HR does have a greater role than other departments in that regard.”

HR professionals can play a critical role in the oversight of ethics-related activities including: developing ethics communications, providing training on ethics standards, handling ethics inquiries and reports, and becoming involved in cases where investigations and disciplinary actions are required, said the study.

HR does have an important role to play but ultimately it’s up the executive leadership to create an ethical organization, said Rose Patten, Toronto-based executive vice-president of HR for BMO Financial Group.

“The senior leadership team is where ethics begin,” she said. “I would not like the sole responsibility for ethics to fall to HR.”

By overseeing training and employee communications, for example, HR ensures that on a day-to-day basis the organization makes ethical behaviour a practical reality rather than an abstract mission statement. “(HR) are the stewards who make it real,” she said.

Patten recently spoke to the Canadian Centre for Ethics and Corporate Policy about the need for corporate North America to rebuild its credibility in the wake of Enron, WorldCom, and so forth.

“Senior executives must lead by example, take personal accountability for high ethical standards, and have zero tolerance for those who stray,” she told the audience. Every quarter, the executive committee at BMO meets individually with CEO Tony Comper and attests to the accuracy of everything they oversee.

However, ethical organizations also need a clearly defined code of ethics to guide employee decision-making. Employees come to work with differing belief systems that can shape their judgments, she said. The belief system that has to guide business decisions has to be the corporate belief system.

Every year at BMO Financial Group, all 34,000 employees must review, and sign a declaration saying they’ve reviewed, First principles: Working with integrity, a 30-page dissertation on the bank’s corporate ethics and values.

The guide includes case studies that illustrate ethical behaviour as defined by BMO and lists the three key questions employees must ask themselves before taking any significant action: Is it fair? Is it right? Is it legal?

But simply putting in place a code of ethics is not enough, said Patten. Ethics must be embedded in the policies, practices and procedures of the organization. They must be acted on every day right from the top of the organization and not just talked about.

At BMO, all leadership development training programs include lessons on the ethical values of the bank. And starting this year, six questions have been added to the annual employee survey to ensure that every unit and work group within the organization is staying true to the corporate values the bank has been heavily promoting in the past few months.

In a further effort to encourage personal responsibility and accountability among its leaders, BMO has revised its stock option compensation plan, reducing the use of options by more than two-thirds.

Options now vest over a four-year period and share price “hurdles” must be met before the options can be exercised.

“In setting these high standards, we are encouraging executives to hold options for the long haul and to realize gains only when other shareholders have also realized equally substantial gains,” said Patten.

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