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Five Years After Sarbanes-Oxley, ERC Study Shows Most Employees Give Publicly Traded Companies High Marks for Ethics

(July 26, 2007)-- Almost 70 percent of employees at publicly traded U.S. companies – those under the purview of the five-year-old Sarbanes-Oxley Act – give their employers an “A” or “B” grade for encouraging ethical conduct, according to a new survey by the Ethics Resource Center (ERC). However, the survey found that roughly one in seven give their employers a below-average grade or failing grade, with the lowest marks most likely at companies with fewer than 100 employees.

“It’s clear that leaders of companies of all sizes still must do more to show they are serious about making ethical conduct a priority,” said Dr. Patricia Harned, ERC’s President.

Moreover, the national ERC survey – conducted this summer among employees of publicly traded companies of all sizes – found that a significant share believe their organizations reward employees for getting good results, even if they use ethically questionable practices:

* Overall at public companies, 22 percent said results are rewarded even at the expense of unethical practices;
* At companies with 100 or fewer employees, 37 percent said that was the case;
* Where there were 100,000 or more employees, 26 percent gave that answer.

Asked, “How often does your job conflict with your personal values?”

* Overall at public companies, 20 percent of employees said that conflict occurs “sometimes or always;”
* 30 percent of those at organizations with 100 or fewer employees said it occurs “sometimes or always;”
* At companies with 100,000 or more employees, 27 percent gave that answer.

When asked to grade their organizations’ efforts to encourage ethical conduct on a scale of A through F, with A being the best, employees of all publicly traded companies surveyed judged their workplaces as follows:

A – 35 percent

B – 34 percent

C – 18 percent

D – 10 percent

F – 4 percent

Grades for encouraging ethical behavior were lower for companies with fewer than 100 employees:

* Nearly one third of employees at smaller issuers gave their company a below-average (a “D” or an “F”);
* At companies with 100,000 or more employees, approximately one fifth of respondents gave a “D” or an “F.”

According to previous ERC studies, employee perceptions of corporate ethics are driven by several factors – awareness of the importance of ethics as initiated by top management, an organizational culture that reinforces the importance of ethics, and the presence of an ethics and compliance program (including internal controls) that detect misconduct taking place.

ERC’s National Business Ethics Survey (NBES) – last conducted in 2005, with a new survey due out later this year – also has revealed that smaller organizations are less likely to have established all of the above elements that result in positive employee perceptions of corporate ethics. This most recent national poll confirms previous indications that smaller organizations are more challenged and have more work to do in encouraging ethical work environments.

ERC’s national survey is based on telephone interviews with a nationally representative sample of 930 employees at all levels in private sector institutions across the United States (the margin of error is +/- 3.3%) from June 25 – July 17, 2007, conducted by Opinion Research Corporation, an independent research firm. Some 1,692 workers representing the spectrum of private sector and public sector employees were polled at the time. The full survey results are available upon request to Eric Call, Ethics Resource Center, 202-872-4767 or by email at eric@ethics.org. Media inquiries should be directed to Brent Gilroy, Ethics Resource Center, 202-872-4788, or by email at brent@ethics.org.

The Ethics Resource Center is a private, non-profit organization devoted to independent research and the advancement of high ethical standards and practices in public and private institutions. For 85 years, the ERC has been a resource for institutions committed to a strong ethics culture. ERC’s expertise also informs the public dialogue on ethics and ethical behavior. ERC scholars analyze current and emerging issues and produce new ideas and benchmarks that matter – for our nation and for the public trust.

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