How employees can keep you on the straight and narrow

It has cost $15 million dollars and with nothing to show for it. Except serious reputation damage.

source: FACUNDO ARRIZABALAGA/EPA-EFE/REX/Shutterstock

Barclays’ CEO Jes Staley  tried discovering the identity of a whistle blower. He ran slap into laws designed to protect people who speak up about unethical practices in business. 

The resulting $15  million New York Department of Financial Services fine was topped by a further 642,350 penalty from the UKs Financial Conduct Authority in May 2018. This sorry saga confirms Barclays is no place for employees to highlight governance issues.

The misguided CEO nearly lost his job. His much publicised experience sends a message to even the most senior company executives.

When staff speak up about unethical practices they can make a considerable difference. Barclays was forced to agree a plan for better internal controls and an improved compliance programme. This included more robust protections for whistle blowers. Senior management oversights of the programme must also be upgraded.  

Elsewhere in the USA, a 2,500 strong staff petition at Ted Baker, which makes designer clothing and accessories, became a collective whistle blower. The staff condemned the actions of its CEO as forcing people to hug him and others. A law firm will conduct an investigation into the allegations and report back to several company non-executives.

Many business leaders subscribe to doing what’s right. In practice, the drive for profits can sometimes be a trade off with ethical behaviour. The most obvious recent large scale example was at Wells Fargo bank. In search of sales, bank bosses pressurised staff to push services at clients, which were not requested. While it made short-term money, it also proved a reputation destroyer. The bank has yet to fully recover from the debacle.   

The ideal business leader is both financially smart and also ethical.  Many responsible business leaders understand what this  means in practice. Good intentions can surface in two important areas of influence: company strategy and through their personal moral compass.

With strategy, ethical business leaders set the ethical tone and re-enforce it in numerous ways. They can ensure there are robust  systems in place which apply to all employees and with vigorous policing.  They have the power to make compliance into a force that no one can ignore.

The second way of demonstrating integrity as a CEO stems from personal behaviour. This may include setting an example by insisting the company does the right thing, ensuring people are treated with respect and insisting on transparency for all important decisions.

Until recently ethical constraints on high level executives have tended to fray at the edges. Employees are showing they can collectively make a useful contribution to helping their leaders take ethics more seriously.

Google workers protest
Google workers protest

Silicon Valley firms, for example, face rising employee anger about unethical or questionable practices.  Tech firms such as Google, Amazon, Microsoft and Salesforce have all experienced significant employee protest campaigns.

These have an ethical dimension but are also political in nature. For example, Google employees recently took a collective stand against their company’s high-level executives accused of sexual harassment.

They also opposed the sale to police of the company’s facial recognition software, and to the company working for the Pentagon.

Technology workers have lambasted contracts their firms have won from both the military and law enforcement. Drones using AI as well as work for certain government agencies have all attracted large scale employee protest.

Employee feedback on ethics can be like gold dust. Sensible business leaders treat such views as a precious asset not a subject for criticism.

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 go along with unethical practices? Why do they become part of the problem, rather than being part of the solution?

Recent Australian research by the Institute of Business Ethics found answers to to some of the important questions. For example, more than one in three workers who knew of misconduct at work nevertheless stayed silent. The new research explains why ordinary employees often feel pushed into acting unethically. The largest cause stems from time pressures and the need to follow orders, rather than evil minded colleagues—see graphic. In Europe as a whole some 16% of employees feel victims from such pressures.

Pressures to act unethicaly
Source IBE Study 2018

IBE Report

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

Whether people speak up about unethical practices they observe depends on the prevailing company culture having 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 knew of some misconduct, would be likely to speak up. This compares to only 42% in those firms without an ethics programme.

Strictly for the brave or stupid

Despite supportive legislation, for any one individual to step out of line and speak up about ethical abuses can and often is a fatal career move. So damaging in fact, that it’s not for the fainthearted. Whistle-blowers often suffer, bullying, harassment, inappropriate or unethical treatment, and other forms of discrimination. 

speaking up

The US Securities and Exchange Commission (SEC) awarded $111 m to 34 whistle-blowers in the five years to 2016. Money though, seldom comes as a reward. Rather it’s compensation for daring to speak up and risking the dire consequences that tend to follow. These can include damage to your 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, he uncovered what he believed was a multi-million-pound bribery scheme. He tried to blow the whistle, choosing to flee the country rather than risk staying. He lost his job and seven years later the case is still being investigated by the UK Serious fraud office.

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.  A recruitment agency view is that “getting a whistle-blower re-employed is practically impossible.

Yet when employees can voice their concerns freely, organisations see increased staff retention and stronger performance. After checking numerous studies, the Harvard Business Review reported in 2016 that in several financial services firms where employees reported speaking up, these business units had significantly better financial performance and operational results than others.

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

 

You may also like:

The high cost of leaders who lose their moral compass: https://www.ethical-leadership.co.uk/the-high-cost-of-leaders-who-lose-their-moral-compass/

Is speaking u p in your company a mug’s game?: https://www.ethical-leadership.co.uk/speaking-up/

 

 

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