It seems that a day does not pass when there isn’t a report of real or perceived ethical misconduct reported in the media and, it comes from all sectors — business, government and nonprofit organizations. Recent examples include reports of government officials taking a bribe from undercover real estate developers, a company misappropriating charitable funds raised from donors and SEC charges against Goldman Sachs. Frankly, there are so many of these types of reports that they are too numerous to mention.

A recent project completed at the Rutgers Institute for Ethical Leadership is filled with more bad news than good about our citizens, youth and leaders. The report is a strong wakeup call if our country is to avoid continuing ethical lapses that create bankrupt companies, failing economies, corrupt governance and misappropriation of philanthropic funds.

The new report, “State of Ethics in our Society: A Call for Action,” notes the rate of observed employee misconduct is high, and nothing short of an embarrassment to our organizations and institutions. One out of two employees, according to the 2009 National Business Ethics Survey conducted by the Ethics Resource Center, reported observing misconduct in this year alone. Misconduct includes behaviors such as fraud, misappropriation of company resources and other actions that would damage a company’s reputation if made public. Things get even worse when we face an economic crisis and companies implement recessionary tactics, such as layoffs and benefits reductions.

Making matters worse, nearly half of survey respondents lack confidence that they will be protected if they report misconduct.

Trust in government, business and nonprofit leaders has dropped significantly. Only 40 percent of respondents in the 2010 Edelman Trust Barometer consider CEOs credible when speaking about their companies.

The future doesn’t look so good, either. Surveys of both college and high school students illustrate an alarming level of justification for cheating. And, as one survey notes, people who cheat in high school are more likely as adults to lie to customers and employers and to cheat on expense reports. Also, the 2007 Junior Achievement Worldwide/Deloitte Teen Ethics Survey reports nearly 40 percent of teens believe lying, cheating, plagiarizing and violence are sometimes necessary to succeed in school.

The institute’s report notes it is important to be realistic about people and to understand there will always be dishonest, unethical people among us. However, that is no excuse for not taking actions necessary to strengthen our institutions’ ethical cultures. Here are a few things noted in the report that leaders should consider:

•  Decision-making needs to take into account all stakeholders and the potential impact on them.
•  Leaders and managers can create an atmosphere where unethical behavior will not thrive. They can do this by demonstrating their own ethical behavior and recognizing and rewarding that behavior in others.
•  Organizations with strong ethical programs report less observed misconduct than those without such programs.
•  Leaders need to set the tone from the top.
•  Human resource processes — such as recruiting, selection, performance evaluation and promotion — should include ethical behavior in decision-making.
•  First-line supervisors and middle managers are most in need for training, since they are typically the first to receive reports
of misconduct.
•  Whistle-blowing systems need strengthening, and employees must be protected if they report misconduct.
•  Heavily regulated industries have less misconduct than regulated industries. More regulations may be needed until leaders earn the right to self-regulate.

Since our future employees, today’s young people, appear to provide little hope for change with the ethical issues we face, we should consider making ethics and personal values a strong part of pre-college and college education. The change we need starts with each one of us recognizing that our behavior either adds to or subtracts from our society. 
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Alex J. Plinio is co-founder of the Newark-based Institute for Ethical Leadership, Rutgers Business School.

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