Are your employees calling the shots on ethics?

Speaking up: after 32 years, reality finally caught up with Ray Kelvin.

Staff put the controversial, long-serving CEO on the spot over “forced hugging.” Some 2,500 staff dared  to speak up, signing a petition protesting the CEO’s intrusive actions. After three decades in power the serial hugger reluctantly stepped down in March 2019.

Hugging
Ray Kelvin, ex Ted Baker CEO

The actions of the Ted Baker staff proved a healthy antidote to unethical leadership behaviour. Kelvin’s fate attracted little sympathy among the lower ranks:

“He hasn’t adapted to the times and neither has the business. It was still stuck in 1988.” 

Nor is this the first time employees have directly or indirectly called top management to account. At Barclays, CEO Jes Staley’s much condemned effort to uncover the identity of a whistle blower ran slap into laws designed to protect people who dare to speak up about unethical practices in business.

The result was a $15million dollars fine levied on the bank, with nothing to show for it except serious reputational damage. Adding insult to injury, the U’Ks Financial Conduct Authority handed out a further £642,350 penalty in May 2018.

The high profile punishment labelled Barclays as a place where speaking up about governance issues was not yet safe for employees. Since the CEO nearly lost his job over it, the message should reach even the most resistant company executives. When staff have the courage to speak up about bad performance issues they can make a considerable difference. In Barclays the bank ended up agreeing to a plan for improving its internal controls and its compliance arrangements. This included more robust protection for whistle blowers, including better senior management oversight.

More recently, Microsoft, has twice faced opposition from a group of unhappy employees. A large group spoke up through an open letter to the company’s chief executive, Satya Nadella, and its president and chief legal officer, Brad Smith. Their letter was commendably direct:

 “We are a global coalition of Microsoft workers, and we refuse to create technology for warfare and oppression.”

The two-page letter expressed alarm that the technology firm had signed a $479 million (€421 million) contract with the US army to supply HoloLens augmented reality headsets for combat environments. It continued:

“We are alarmed that Microsoft is working to provide weapons technology to the US military, helping one country’s government ‘increase lethality’ using tools we built. We did not sign up to develop weapons, and we demand a say in how our work is used.”

This was the second time in 12 months that employees had consigned their leaders to the ethical hot seat. Last June 2018 they openly complained about the firm’s contracts with the US immigration and customs enforcement agency (ICE). At the time, ICE was drawing criticism for its policy of separating families at the US-Mexico border.

Many business leaders subscribe to doing what’s right. In practice the drive for profits often outguns a commitment to ethical behaviour. A recent large scale example of this occurred at the Wells Fargo bank. 

The ethical constraints on high level executives continue to be fragile. Yet the climate is changing and employees can make a useful contribution to helping their leaders take ethics more seriously.

What gets in the way?

What stops employees from giving business leaders the vital information they need about ethics? Why do those below the top echelon of a company so often go along with unethical practices? Why do they become part of the problem, rather than being part of the solution?

Recent Australian research found more than one in three workers who knew of misconduct at work never-the-less stayed silent. The new research explains why.

Rather than stemming from  evil minded colleagues, the biggest cause for employee silence on ethical issues arises from time pressures and the need to follow orders.  In Europe too, around 16% of employees feel victims from such pressures.

When asked what influenced their decision not to speak up about unethical practices, one in three employees (32%) said it might endanger their job. More than a quarter (27%) felt that their company would anyway not take corrective action.

Whether people speak up about unethical practices they observe, rather depends on the company’s culture and whether there’s a proper ethics programme in place. Across Europe as a whole, for example, in companies with an existing ethics programme, almost three out of four employees (73%) employees who saw misconduct, would be likely to speak up. This compares to only 42% in companies without an ethics programme.

Strictly for the brave or stupid

Despite supportive legislation, whistle-blowers who do draw attention to unethical company practices, often suffer, bullying, harassment, inappropriate or unethical treatment, and other forms of discrimination. In many instances is also triggers a fatal career move.

Speaking up is therefore not for the faint-hearted. A study by Warwick Business School found that most (82%) whistle blowers reported being demoted or given more menial work. Almost all were eventually dismissed or resigned.  To make matters worse, recruitment agencies say that “getting a whistle-blower re-employed is practically impossible.”

To encourage speaking up the US Securities and Exchange Commission (SEC) awarded $111m to 34 whistle-blowers in the five years to 2016. More recently Ted Siedle a renegade employee of JP Money in caseMorgan Chase the number one US bank, hit the jackpot when he received a staggering $78m from two financial regulators. The fortune came as a reward for blowing the whistle on his ex bank. The latter had failed to disclose that it was steering customers to its own investment products, rather than those offered  by rivals.

Money though, seldom comes as a reward for speaking up on ethical issues. Rather it’s a form of compensation for daring to risk the dire consequences that tend to follow speaking up. These can include damage to home, health, work and wealth. For example, in 2017 Ian Foxley blew the whistle over an alleged payment of bribes at GPT Special Projects Management, later a unit of Airbus.

Based in Saudi Arabia, Foxley had to flee the country when he uncovered what he believed was a multi-million-pound bribery scheme. He lost his job and seven years later the UK Serious fraud office continues to investigate. Hardly much help to Foxley.

Yet when employees do voice their concerns freely, organisations gain better staff retention and experience more productive performance. For example, after a checking numerous studies, the Harvard Business Review reported in 2016 that in several financial services firms where employees spoke up, these business units reported much better financial performance and operational results than others.

8 Ways to speak up at work

Putting Speaking Up on the map

It’s encouraging that more employees seem to be willing to put their firms on notice about ethical issues. Yet it remains a minority sport. There are plenty of reasons for that hot line staying silent, or people fearing to raise their head above the parapet.

The number one turn off for speaking up remains fear of retaliation or looking stupid. The second deterrent is worry about appearing to challenge senior management. Personal upbringing and company culture can exacerbate this. For example some employees may have learned from an early age never to question authority.

Previous bad experiences of speaking up reverberate in a company long after the actual incident has been forgotten. The challenge then reverts to a cultural one—how to overcome past horror stories and re-build employee confidence that speaking up makes sense.

Failure to act on adverse feedback may be yet another reason why employees fail to give feedback that could otherwise help protect a firm’s reputation. Perhaps a previous poor supervisor, or someone took feedback but failed to act on it. Consequently, employees conclude that the effort won’t be worth the effort.

The role of leaders proves to be critical for inducing employees to come forward with challenging feedback. Especially about ethical matters, such as corruption, or harassment. When they do, even the inhabitants of the C suite may find themselves called to account.

Six ways to encourage speakin gup

Sources:

  • Samuelson, Our best hope for companies with social conscience is their workers, Quartz at Work, November 21, 2018
  • Ethics at Work Survey The Institute of Business Ethics (IBE), in Partnership with The Ethics Centre, 2018.
  • Can Your employees Speak Freely, Harvard Business Review Jan-Feb 2016
  • Clegg, Whistleblowing can be life changing, FT, 3rd December 2018
  • Gallo, How to Speak up about ethical issues at work, Harvard Business Review, December 2015
  • Staff put Microsoft in ethical hot seat over army contract
  • Lillington
  • Net Results, Firm has been an ethics leader in big tech, but has some soul-searching to do, Irish Times March 4th 2019
  • Detert, E.Burris Can Your Employees Really Speak Freely? HBR Jan–Feb 2016
  • B.McLannahan, Best ways to encourage whistleblowers is to reward them, FT 6th March 2019
  • J.Eley et al, Ted Baker chief quits after 32 years. FT, 5th March 2019

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