IBE Survey - Ethical Risks 2024
19 February 2024
What is the ethical issue?
Companies can experience a gap between having a business ethics programme in place and its absorption by employees. In considering ways of closing this gap, a number of organisations are no longer relying on negative deterrents but are developing positive incentives to encourage high ethical standards throughout their business.
Some organisations consider the only reward necessary to incentivise ethical behaviour in an organisation is to assure employees they ‘are doing the right thing; seeing this as a sufficient reward in itself. Yet many companies recognise that this still allows ethical lapses to continue, and find a more active approach is an effective way to sustain high ethical standards, through more tangible incentives.
The nature of incentives can vary from business to business. They boil down to two principal methods: sanctions and rewards. The first, sanctions, is the threat of disciplinary action when any part of the code of ethics (or equivalent) is breached. This action can often manifest itself in termination of employment. Contrastingly, rewards are the provision of some form of inducement to behave ethically, be it monetary or non-financial, that can positively influence continued ethical behaviour. Rewards may be linked to annual appraisals. Employers need to consider which of these two approaches benefits the employees and the organisation the most.
The issue that arises for employers through incentivising, is ensuring that the process is fair and open. Organisations need to demonstrate to employees that taking into account ethical values in both their decision-making and their relations with principal stakeholders can reap rewards. Yet these rewards need to be measured and clearly justified, so as not to face backlash from other employees, stakeholders or even the public. Incentives can create divides between employees, so outlining why they have been distributed can encourage wider ethical behaviour.
IBE Guidance
A summary of good practice
- Incentivising allows organisations to demonstrate to employees how an ethics policy applies to their day-to-day business life, thus embedding ethical behaviour further into daily practices. A survey by Deloitte indicated that senior management and immediate supervisors taking a positive approach to encouraging ethical standards was an important factor in the promotion of ethical practice in the workplace. Positive reinforcement of ethical behaviour through some kind of reward is seen by many companies as worthwhile.
- There are also key indicators and attributes of an effective incentive scheme. Incentives need to be seen as fair by recipients and others in the organisation, and directly related to the company's core values. Incentives also need to be easily understood by employees, and incentives should be proportionate in size to the achievements being recognised.
Further resources
Paying to be good?
The IBE’s Associate Director, Professor Chris Cowton, discusses a new question on CEO pay that was included in our recent public attitudes survey.
20 July 2023
Fair enough?
Deputy Director, Rachael Saunders outlines some of the key findings from the 2023 Attitudes of the British Public to Business Ethics survey.
13 July 2023
Attitudes of the British Public to Business Ethics 2023
The findings from the IBE's 2023 annual survey on British public attitudes toward business ethics reveal fewer believe businesses are operating ethically.
11 July 2023
If You’re So Ethical, Why Are You So Highly Paid? recording
Catch up on our latest webinar with Professor Alexander (‘Sandy’) Pepper.
16 December 2022
Attitudes of the British Public to Business Ethics 2021
Britain’s businesses could behave better - the 2021 results of the IBE's annual survey of the attitudes of the British public to business ethics.
17 January 2022
Decisions, decisions…
Read the latest blog by Mark Chambers, IBE's Associate Director (Governance).
11 March 2021
Attitudes. Ethics. Trust.
In this blog, Guendalina Donde, IBE's Head of Research, discusses the results of the 2020 Attitudes of the British Public to Business Ethics survey.
13 January 2021
Attitudes of the British Public to Business Ethics 2020
The 2020 results of the IBE's annual survey of the attitudes of the British public to business ethics.
30 December 2020
Attitudes of the British Public to Business Ethics: 2019
The 2019 results of the IBE's annual survey of the attitudes of the British public to business ethics.
17 December 2019
A Year In Review: Ethical Concerns and Lapses 2018
Read the IBE's annual analysis of business ethics news stories from the last year - which were the sectors and issues most in the news in 2018?
30 January 2019
Attitudes of the British Public to Business Ethics: 2018
The 2018 results of the IBE's annual survey of the attitudes of the British public to business ethics
13 December 2018
Attitudes of the British Public to Business Ethics: 2017
The 2017 results of the IBE's annual survey of the attitudes of the British public to business ethics
12 December 2017
Fair or Unfair: getting to grips with executive pay
This Board Briefing offers both practical advice on how remuneration committees can address the challenge and some pointers to possible reform centred around the need to be clear about the value of what is being awarded and the pace at which remuneration is earned. Fairness and simplicity are the two themes which run through this publication.
10 February 2016
Fairness in the workplace: Staffing and employment contracts
This IBE Briefing considers ethical issues related to staffing arrangements and employment contracts. Specifically, it looks at the potential ethical implications of the ‘casualisation’ of the workplace, including zero hours, agency contracts, part-time workers and transfers under TUPE.
30 April 2015
Fairness in the Workplace: Pay
This Briefing looks at how fairness can be achieved in the specific areas of executive remuneration and paying a living wage. It also briefly addresses some additional pay issues, and provides examples of ways in which some companies are addressing the issue of fairness in pay.
02 July 2014
Supply Chain and Payment Practices
This briefing explores the three issues involving supplier payments. It then looks at governmental attempts to curb the problems and how companies are addressing the issue.
06 November 2013