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Reporting Misconduct - Types of Misconduct

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Every product recall, financial crime, or industrial accident triggers the same questions: How long have these problems been going on? Didn't anyone see what was happening? Why didn't someone say something?

Those are appropriate questions that put everyone in an organization under scrutiny. Didn't anyone know what was going on - and if someone knew, why didn't he or she say something? According to a 2010 report by the Ethics Resource Center (ERC) ("Blowing the Whistle on Workplace Misconduct"), six out of ten employees who saw misconduct did in fact report it. Those numbers show an upward trend in reporting of issues the past three years alone and despite an economy that has shaken institutions and individuals, the percentage of employees willing to report misconduct continues to grow.

The positive impact of employees' reports of misconduct cannot be overstated. According to the Certified Fraud Association, 43 percent of company fraud is uncovered by tips, largely from employees. Those reports give employers the front-line insight they need to change processes and policies that allow unethical actions to occur. Perhaps most important, employees' reports of misconduct demonstrate the strength of a company's culture. According to the ERC, companies with strong ethical cultures are much more likely to have employees who are willing to report concerns over possible misconduct.

Types of Misconduct

It is encouraging that the percentage of employees willing to report possible misconduct is rising, but the ERC's 2010 research brief ("Who's Telling You What You Need to Know, Who Isn't, and What You Can Do About It") drills into the 60/40 numbers to reveal differences in reporters and the misconduct they expose. Based on the ERC's research, women are more likely to report misconduct overall than men (66% to 60%); managers are more likely to report misconduct than non-managers (67% to 58%); and overall reporting rises with responsibility in the company (82% for top managers to 55% for non-management employees).

Misconduct affects everyone in the organization, most blatantly because it erodes the fabric of our culture and the trust between employees and their co-workers, managers and company leaders. Employees are more likely to report misconduct if they have positive attitudes toward their companies and leaders. Not surprisingly, employees who feel they have a vested interest in the company's performance and integrity have a high reporting rate (72%).

The most rewarding number for companies that actively drive ethics at all layers of the organizations is this one: A strong ethical culture translates into a 15% increase (from 57% to 72%) in the rate of misconduct reporting.

A Decision Not to Report

The ERC's survey shows that six of ten employees reported misconduct they saw during the previous year. While that is unquestionably positive, what about the roughly 40% who don't report misconduct? Studies differ on the "40%" and they differ in ranking the reasons why employees decide not to report misconduct they witness or believe to occur. Some employees don't want to get involved or expect someone else to report the violation. Others think the misconduct they witness is acceptable. Still others believe that their company's managers and top executives tolerate misconduct by top performers.

The most disturbing reason given for not reporting misconduct is fear of retaliation. Retaliation takes many forms. However, according to the ERC research, more than 60% of those who reported misconduct and felt they were



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