Despite a continuing wave of ethical lapses in major corporations, large numbers of ethics officers say their boards of directors have never received training in ethics or compliance issues, The Conference Board reports in a survey released today.

The survey covers more than 80 ethics, human resources and legal officers participating in The Conference Board’s 2003 Ethics Conference in New York.

While 81 percent of firms have conducted ethics and compliance training among their employees, only 27 percent have held any training sessions for their directors. About 55 percent of those surveyed say their boards are “not engaged enough” in major ethical issues involving the company.

Some 67 percent of the surveyed executives say compensation for senior executives is “out of control” in their companies. About 62 percent acknowledge that executives who leave their companies because of major violations of the company’s ethics and compliance codes “get a financial package and go.” In about 38 percent of the firms, wrong-doing executives leave the company without a package.

“Although board involvement in governance has increased dramatically in the past year, this is a clear indicator that ethics officers, boards and executives need to strive for higher levels of ethical leadership and accountability,” said Steve Priest, who conducted the survey, and is founder of the ten-year-old Ethical Leadership Group, the world’s leading business ethics consulting firm. “Ethics officers, along with Warren Buffett, recognize that extremely high short-term incentives can distort long-term business performance. The finding that is most troubling – both in itself and because of the message it sends to all the honest, decent employees – is that in over 60 percent of companies, executives who do the wrong thing actually get rewarded with a severance package instead of what they deserve. What do they deserve? Let’s let the employees and shareholders who have lost billions of dollars decide.”

Some Rotten Apples are Promoted
The Conference Board survey finds that nearly 5 percent promote “great performers” who don’t live up to their companies’ values, with 22 percent saying they “tolerate them” and more than 25 percent reporting that they “coach them.” Less than 8 percent of the companies fire them.

The survey shows that while most believe corporate ethics training can play only a modest role in preventing major scandals, it won’t halt malfeasance in all companies. About 42 percent say ethics training would have made no difference in the Health South business scandals, just as a majority of these officers said ethics training would not have prevented the Enron debacle. “This is not an indictment of ethics training,” according to Priest, “it is recognition that ethics codes, training and hot-lines are only part of the answer to preventing wrong doing. Good ethics programs pay as much attention to incentives, culture and management as they do to codes and training.”

While a large majority of these surveyed firms have toll-free hot-lines for employees to report concerns about ethical lapses, 69 percent of the executives say that fear of retaliation is a “big issue” in their companies. Only 6 percent say their companies have a “culture of dissent” where employees can openly speak their minds.

“Time Magazine named three whistleblowers as Persons of the Year for a good reason,” said Priest. “Raising bad news is not rewarded in organizational life. This is not just a corporate problem, nor simply an ethics issue. From ‘The Emperor Has No Clothes’ to the just-reported NASA failures with the Columbia Space Shuttle, cultures where people go along rather than honestly confront hard facts have cost money, reputation and lives. It is the single biggest business challenge organizations face.”

Among other key findings:

• 59 percent say the Sarbanes-Oxley Act is a “plus that will foster improvement in ethics, compliance and governance.”
• About 41 percent expect 6-10 more major business scandals among Fortune 500 companies during the next 12 months.

Source: Benchmark Questions, Survey / Conference Board Business Ethics Conference, May 29-30, 2003.