Study looks at corporate commitment to ethics
Vol. 17, No. 13Dec. 4, 1997

Study looks at corporate commitment to ethics

Columbia/HCA Healthcare Corp. has initiated an ethics program since the U.S. Justice Department began an investigation into Medicare fraud allegations. But, according to Gary Weaver, coauthor of a soon-to-be released study of major corporations' ethics programs, most only "go through the motions."

Weaver, business administration, Linda Kelbe Trevino, professor of management and organization at Pennsylvania State University's Smeal College of Business Administration, and Philip L. Cochran, director of Smeal's Center for the Study of Business and Public Issues, will publish a research paper in the Journal of Business Ethics within the next few months revealing the findings of a detailed study of ethics programs among Fortune 500 industrial and 500 service corporations.

The researchers began their investigation early in the 1990s, after defense contractors instituted ethics programs in the wake of scandals over $500 toilet seats and $9,000 wrenches.

In 1991, Congress changed sentencing guidelines for corporate crime to allow fines high enough to act as a deterrent. Federal courts were to assign convicted companies a "culpability score." A low culpability company could pay $2 million while a high culpability company could pay $160 million for the same type of crime. That score is affected by whether or not the company has a program in place for preventing and detecting improper behavior, Weaver explained.

Weaver, Trevino and Cochran asked corporations who has formal responsibility for ethics management, how ethics offices are structured, how companies evaluate the effectiveness of their programs and how actively CEOs encourage ethical behavior.

Ninety-eight percent of the 254 responding companies had some kind of ethics code or policy in place. "Some organizations are doing a good and thorough job, supporting their ethics policies with executive commitment, serious training, constant communication and self-scrutiny. There's even a professional association of corporate ethics officers now," Weaver said.

But, there's also reason to believe that many companies' ethics policies and programs are superficial. "When you look at what they're doing, there's not much follow-up," Weaver said.

For example, although 137 of the responding firms formally assigned ethics responsibilities to a single officer, more than half said the officer spends 10 percent or less of his or her time on ethics issues. Only 19 corporations had ethics officers who devoted more than 90 percent of their time to ethics.

Slightly more than half the responding companies have a telephone call-in system for receiving ethics questions and complaints, but a quarter of those systems get no more than one call per 10,000 employees each month. Eighteen percent of those get 20 or more calls per month.

Researchers also found that, generally, CEOs make only a minimal effort to publicly endorse an official commitment to corporate ethics, with 46 percent sending only one company-wide ethics communiqué a year to employees, and 62 percent of those neither live nor taped. In addition, only 46 percent said CEOs discuss ethics issues with ethics officers, and those only did so at least once or twice a year.

The survey suggests that despite the attention corporate ethics has received, companies are only "going through the motions of trying to address ethical issues," Weaver said.

When they started their research in 1994, Weaver and his colleagues expected to find a large number of corporations making serious efforts at getting out the word that being honest, fair and just to customers and employees was of maximum importance and an equal number doing almost nothing.

Instead, they found a large group of companies doing the easy things, like having a code of ethics and appointing people to ethics positions, but at the same time ignoring the everyday organizational supports that ethics policies and programs need if they are to be effective, Weaver said.

While companies that have these formal ethics programs might influence a federal court, the same can't always be said for their officers and employees, he said.

Weaver, who joined the UD faculty in 1994, holds a bachelor's degree from Bucknell University and a Ph.D in philosophy from the University of Iowa.

-Barbara Garrison