Encouraging advantageous conduct on the job: a strong ethical culture.

• Position: National Business Ethics Survey - Ethics Resource Center - Report

CPA firms and their clients understand the value of establishing policies and controls to deter and detect fraudulent acts in an organization. Cues from top management, as well as peer pressure, encourage employees to do the right thing. A strong ethical culture not only discourages misconduct but also helps retain employees and encourages productivity.

The findings of a study released in June by the Ethics Resource Center (ERC) are not surprising: organizations with strong ethical values--from top executives to middle managers to workers--experience less misconduct, more frequent reporting of misbehavior, and less retaliation on the job. According to the study The Importance of Ethical Culture: Increasing Trust and Driving Down Risks, a company's strong ethical culture has a profound positive impact on the kinds of workplace behavior that can jeopardize a business.

Along with fostering an ethical culture, companies that discourage and minimize employee misconduct also support their strong culture by ensuring that controls and policies are in place to help deter and detect misconduct.

In organizations with stronger cultures, far fewer employees (4%) feel pressure to commit misconduct than in weaker cultures (15%). Similarly, in stronger cultures, employees' observations of misconduct by coworkers are nearly twice as high (76%) as in weaker cultures (39%).

According to the report, top managers' actions (and the way they are perceived) have a significant impact on outcomes, and the coworker culture (peer pressure) is particularly powerful in containing the amount of financial misconduct that employees witness.

"The NBES (National Business Ethics Survey) data consistently tell us that a strong ethical culture offers the best protection against risky workplace behavior, which can easily land a company on the front page in a very damaging way," said Patricia J. Harned, Ph.D., president of the ERC. "Rules and a code of conduct are always necessary, but it's good leadership and peer pressure to do the right thing that often save the day."

To view the study, go to www.ethics.org/files/u5/CultureSup4.pdf.

Increased Loyalty and Engagement

A subsequent study of workplace data collected by the ERC indicates that employees tend to respond to an ethical culture with improved company loyalty and a willingness to "go the extra mile" for their employer.

The report Ethics and Employee Engagement, released July 8 by the ERC, suggests that "employee engagement...