Executive Briefing http://www.shrm.org/Publications/hrmagazine/EditorialContent/2010/121...

Executive Briefing
Vol. 55 No. 12

Strong ethical culture helps bottom line; programs for female leaders scarce; more.

12/1/2010 By Dori Meinert

Strong Ethical Culture Helps Bottom Line

Nice guys don’t always finish last. A recent study has found that
integrity has a tangible impact on corporate performance.

Companies with weak ethical cultures experience 10 times more

misconduct than companies with strong ethical cultures, according to a
survey of about 500,000 employees in more than 85 countries
conducted by The Corporate Executive Board in Arlington, Va.
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In strong ethical cultures, employees are comfortable speaking up
about their concerns without fear of retaliation, says Dan Currell,
executive director of The Corporate Executive Board’s Legal and
Compliance Practice.
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"Unfortunately, many employees today fear retaliation for reporting Email to a friend
misconduct," Currell says. That fear prevents ethical cultures from
thriving and prevents businesses from reaping rewards:

Companies whose leaders strongly encourage open communication

deliver shareholder returns that average 5 percent higher than their
competitors’ returns, researchers found.

In addition, companies identified as having high-integrity cultures are

67 percent less likely to observe significant instances of misconduct,
such as accounting irregularities and insider trading, than companies
with low-integrity cultures.

The study measures ethical culture by asking employees questions such

as whether they are comfortable discussing possible misconduct with
their managers and whether they think company officials will respond
to unethical behavior. Many employees say they don’t report
misconduct because they are skeptical their employers will do anything
about it, Currell says.

Executives traditionally try to reduce risk by increasing internal

controls, but those controls can be circumvented by employees—either
for efficiency or personal gain. The Corporate Executive Board study
found that companies with strong internal controls didn’t necessarily
have lower misconduct levels.

To prevent misconduct, corporate leaders should work to ensure open

communication between employees and build trust in leadership,
Currell says. One challenge is that senior executives think their
company cultures are healthier than middle managers and
non-managers do, he says.

"Within organizations, good news is like a helium balloon. It rises to the

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top right away," Currell says. "Bad news walks around in cement
shoes."

Hispanics Lag In Retirement Plans

Hispanics lagged behind other U.S. workers when it came to

participation in employer-sponsored retirement plans in 2009,
according to a study by the Employee Benefit Research Institute
in Washington, D.C.

Forty-nine percent of white workers participated in employer-

sponsored retirement plans last year, compared with 42 percent
of black workers and 27 percent of Hispanic workers, the study
found.The gap between white and black plan participants
disappeared when comparing workers at higher income levels.
Of those earning $50,000 or more, 70 percent of white and black
workers participated in a retirement plan, but only 57 percent of
Hispanic workers with the same income did so.

The participation rate for Hispanics is brought down

considerably by the habits of first-generation immigrants, says
Craig Copeland, the institute’s senior research associate. While
40 percent of U.S.-born Hispanics participated in retirement
plans, only 20 percent of Hispanics born outside the United
States were enrolled.

"Maybe they don’t plan to retire here. Maybe they’re just

sending money back to other countries," says Copeland of the
newest immigrants. "They may have limited trust in the financial
system."

The number of U.S. workers participating in retirement plans

decreased for the second year in a row, according to researchers
who based their work on U.S. Census Bureau data. Among
full-time wage and salary workers most likely to have benefits,
54 percent participated in a retirement plan last year, down
from 55 percent in 2008 and a high of 60 percent in 1999.

Programs for Female Leaders Scarce

While leaders in many U.S. corporations are seeking to increase

diversity in their workforces, 70 percent don’t have a clear
strategy for developing female leaders, according to a survey by
Mercer, a New York-based benefits consultancy.

In addition, about 43 percent of the 542 companies surveyed

don’t offer any activities or programs aimed at female leaders,

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the researchers found. While

23 percent of the organizations offer some programs, another 19
percent only track the progress of women. Just 5 percent offer a
robust program, but 4 percent plan to add programs in the
future.

The chief obstacles for women seeking to advance within their

companies include lack of an executive sponsor, cited by 43
percent of the survey respondents, followed by insufficient
breadth of experience (36 percent) and work/life balance (31
percent), the study found.

However, when it comes to offering programs to help women

advance in the ranks, the solutions being provided by companies
don’t always address the problems, says Colleen O’Neill, a
senior partner in Mercer’s human capital consulting business.
Respondents identified flexible work arrangements, coaching,
mentoring, and diversity sourcing and recruiting as the most
effective programs for developing female leaders.

But "by just offering flexible work arrangements, you’re not

going to fix the problem. It certainly helps for more entry into
the workforce, but we know that leadership development is a
multi-phased process," O’Neill says.

The September survey was conducted by Mercer in conjunction

with Talent Management and Diversity Management magazines.
It recorded the responses of human resource, talent
management and diversity leaders at the companies surveyed.

Meanwhile, a coalition of global investors is calling on

companies around the world to increase representation of
qualified women on boards of directors and in senior
management. Pax World, Calvert and Walden Asset Management
have asked 54 companies for more-
specific information about gender balance in their organizations.

Security Policies: Problem or Protection?

Firewalls are frustrating employees, yet stronger website

restrictions appear to be delivering results from a cybersecurity
standpoint: A Robert Half Technology survey in August of 1,400
chief information officers at U.S. companies with 100 or more
employees indicates that employees denied access to certain
websites are frustrated by these restrictions.

Although more than 40 percent of chief information officers said

they currently field complaints about information technology
security measures, these measures have proved to be effective
in recent years.

From 2006 to 2009, the number of discovered vulnerability

threats reported by IT security professionals decreased by
roughly 25 percent, according to the annual Cyber Security Risks
report by Hewlett-Packard Development Co. Yet the report
indicates that some of the most serious IT security issues stem
from employees' office use of Facebook, Twitter, WordPress,
iTunes and other consumer technologies that company officials

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increasingly use for marketing and communications and that

employees tap for personal use.

The solution involves striking a balance between effective

security and common sense. For example, rather than restricting
all or even certain websites, IT security policy authors could
place curbs on the time employees spend surfing the web.

Employees intent on mitigating firewall frustration should ask

why the IT security policy exists and, if appropriate, make a
business case for changing the policy, Robert Half Technology
suggests.

By Rita Zeidner, a former senior writer for HR Magazine.

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