Podcast featuring Dr. Linda C. Ashar, J.D., Faculty Member, School of Business and
CJ Sherman, Faculty Member, Legal Studies
Nearly half of U.S. employees reported that they observed misconduct in the workplace. This is both extremely concerning, but also mind-boggling that companies believe they can essentially get away with unethical or illegal practices without consequences, says APU professor CJ Sherman. In this episode, she talks with Dr. Linda Ashar about misconduct in the workplace, what measures need to be put in place to prevent it from happening, and how to address misconduct when it occurs. Hear examples of companies that engaged in gross misconduct and illegal activity like Wells Fargo, Volkswagen, and General Motors. Also learn what options employees have when they recognize misconduct, how to protect themselves from retaliation, and what policies companies need to have in place to encourage employees to report misconduct.
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Read the Transcript:
Linda Ashar: Welcome everyone. I am Linda Ashar, host for this podcast. Thank you for joining us today. Our discussion focus is dealing with ethical challenges in the workplace. Whether you are an employer or employee, today’s question is, “what is your ethical game plan?”
I am pleased to welcome my guest today, CJ Sherman, to share her expertise and experience on this topic of workplace ethics. CJ is an associate professor of Legal Studies in the School of Security and Global Studies at American Public University. She also is an attorney with more than 15 years in private practice, and she is licensed in Pennsylvania and New Jersey. CJ, thank you for sharing your time with us today.
CJ Sherman: It’s great to be here, Linda. Thank you for having me.
Linda Ashar: I want to set up a quick background for our discussion, to give us some context about workplace ethics. In 2020, the Ethics & Compliance Initiative took the ethical pulse of the American and global workplace and released its results in 2021. This was ECI’s 16th year in researching the state of ethics and compliance programs in business, which is why I thought their report would be valuable for our discussion.
The previous survey for comparison was in 2017. This survey looked at four key measures of ethical outcomes in the workplace. These are:
- Pressure upon people to compromise ethical standards
- Observation of misconduct at work
- Employee reporting misconduct
- Retaliation against employees for reporting misconduct
Now, I invite anyone with an interest in the details of this survey to look it up. The link will be in our podcast transcript. But two significant highlights of why I mention it here are that 49% of U.S. employees reported that they observed misconduct that violated their organization’s ethical standards.
And the other highlight, retaliation against employees for reporting misconduct was the highest ever reported in these surveys. Bearing in mind, that 2020 was a year that might have been skewed in a survey due to the increased stress and aberrations of the COVID-19 pandemic, it was interesting also that the survey’s results overall were not significantly different. And in some points, better, which I thought was good news, than previous surveys. But the exception of that high retaliation report, not so good.
So with that background to focus, CJ, what are your thoughts about the survey stating 49% of employees reported they’ve observed unethical conduct? And is this a high number, and what about that higher retaliation result? What are your thoughts?
CJ Sherman: Thanks, Linda. Well, I’d like to think that any number is too high. That number, 49%, actually down a few percentage points from what it was a few years ago, but still, that number is alarming to me. And I want to take a look at, kind of set us on the track of where we’re going to be going here in terms of ethics and morals.
We often use those terms interchangeably and they kind of are the same in terms of their root meaning. Ethics coming from a Greek root and morals coming from Latin, meaning kind of our habit or custom to do the right thing. But we know that now we kind of use ethics more in the business sense. That is, does a business have a particular ethical code or guideline? And morals, we think of more as personal values.
So just to remind us all of kind of what this looks like in the business world, in talking about ethics and morals, we know that companies typically have a code of ethics and they also usually have a code of conduct. We know in the legal profession, there are the rules of professional conduct. Most professions have something to guide us. Most companies have something to guide us.
Those codes of ethics are all about decision-making. And those codes of conduct are all about our actions. The code of ethics is typically kind of the company’s constitution, if you will, their values. And the code of conduct is about obeying certain rules. We don’t want our employees to engage in any type of discrimination or sexual harassment, right? We like to think that we could all follow those guidelines.
But given your point about the percentage, we know that in every profession there are these ethical lapses, typically leading to illegal conduct. So it’s not just the business world, it’s the legal profession. We see it in sports. It’s rampant. So how did we get here? How does this happen? And so, I see two themes of how we got to this place.
So one, we have our leaders and we’ll focus on business now for a company, but it could be any profession. We see kind of what I like to call the three prongs. So power, money, and prestige. And so, we all like this, right? It’s okay to like money, right? That’s why we’re all here, right? We want to keep making more money. And there’s nothing wrong with power. There’s nothing wrong with prestige.
But the theme that we keep seeing in so many of these companies is that leaders start out good. I don’t think anyone has the intention in starting a company or being hired to run a company or being one of the leaders or managers of a company, we don’t start out saying, “Oh, I’m going to do all sorts of bad things when I join this company.”
But we end up going that way, perhaps because of that money, power and prestige issue. That is, that we lose sight of that we’re there for the greater good. We’re for the company. We’re there to help people or whatever the company’s mission is.
And instead, it becomes a self-interest type of situation, so that we start doing things because it’s all about what could we do to achieve more celebrity, that is, for myself as the leader. And that might mean cutting corners and doing whatever it takes to make more money. So I shine. So I get more exposure in the media and so on. So that’s one way that we get to this type of unethical behavior.
And these managers and leaders typically rationalize and kind of lose sight of that what they’re doing is harmful, right? We make excuses for everything. And I’ll talk more later about how leaders then often surround themselves with people that don’t point out that this is wrong. You surround yourself with a bunch of “yes” people, that agree with everything that you say.
So we have those leaders, right? The money, power, prestige. And then we have the people that are doing the work, that are receiving mixed messages. And I think you kind of hinted at this in your introduction, and that is that workers are told to achieve certain quotas or goals. And we’ll talk about this, I hope with Wells Fargo, right? So they receive certain quotas and goals to achieve, and they had their code of conduct and their code of ethics. So that told them one thing, but then they had this other message telling them a completely different thing, saying, “No, you have to do these things.”
And the leaders weren’t kind of reining anybody back. They were going along with this conduct and the intense pressure to meet these quotas overrode any type of ethical code that was out there or their code of conduct. And, in essence, all of these individuals lost their own morals, their moral compass, right?
Morals are about kind of your individual values. And they then also did not follow the company’s policy, because, we’ve heard this many times when things go wrong, “everybody’s doing it. That’s the way things are done here.”
Linda Ashar: Is there a disconnect in people’s minds between illegal and unethical sometimes? When employees say they see violations of code of conduct, they’re not likely distinguishing necessarily between unethical and illegal, are they?
CJ Sherman: Well, that’s a good question, and a really good point. I mean, we know in our history that there’s certainly been things that were legal, but were incredibly unethical and immoral. Slavery is probably the easiest example. And then there were all sorts of examples along the way, with preventing people from voting: poll tax that was legal.
I like to hope that we knew, or most of us knew, or some of us knew, that that was immoral and unethical. And I don’t believe that a lot of workers, when they’re engaging in this behavior are able to make that leap to that, “This is really illegal.”
Because when you’re in that group mindset, we know that people act differently when a group of us are kind of all working together and engaging in this type of conduct. We may think it’s not great, but this is kind of how it’s done. This is what’s happening in the business world. And that group type of mentality takes us away from recognizing the illegality of our conduct.
And I also believe that most workers don’t sit down, when they get that job, they don’t sit down and read the laws that they have to comply with. They don’t sit down and have the code of conduct and the ethical guidelines by their bedside each night.
Linda Ashar: Well, don’t you think the expectation is that the employer is not going to be doing anything illegal?
CJ Sherman: Oh, absolutely. You join a company and you want to follow the leader. You want to be compliant. It’s no different than when we’re children and we want to kind of follow what adults say, or at least that’s what we know we’re supposed to do, right? We’re supposed to be compliant.
And when we join a company, we want to be compliant. We want to do what they say. And that often is partly what gets us into trouble, because we end up doing what they say, not recognizing or not being willing to recognize that that type of direction is unethical and moving toward illegal, if not illegal already.
Linda Ashar: And that I think is a good place to talk about what happened in Wells Fargo. I mean, people know from maybe reading news stories that the Wells Fargo, several years ago now. had a huge scandal about fake accounts. Can you elaborate on what happened in the Wells Fargo case?
CJ Sherman: Sure. And I should also note that Wells Fargo most recently, during COVID, got caught again, doing bad things, if you will. About 100 employees were making fake loans to the Small Business Administration. So that’s the sad part. Wells Fargo assured us in congressional hearings that, “We will do the right thing.” And a couple of years later now, they haven’t.
So going back to your original point, so Wells Fargo employees, about 5,300 of them were making these fake accounts that is setting up auto loans for people who perhaps didn’t even have cars, things like that. Or just setting up fake accounts for people who maybe had a mortgage, and then they’d set up a fake bank account. And there was enormous pressure on workers to meet certain quotas, to set up certain accounts, to do a certain amount each day.
And so managers checked on them to make sure that they were progressing toward these, what they call these sales quotas. And they would earn big bonuses when they did make these quotas. So, again, it goes back to these conflicting messages that I mentioned, right? So incredibly aggressive sales goals that they had to meet, opening these bank and credit cards accounts for customers without their knowledge. And no one was taking a step back and saying, “Does this align with our company constitution?” If you will. “Does this align with our code of conduct?” No one was doing that.
Linda Ashar: Along with that, how about the law?
CJ Sherman: Yeah, just a little thing called the law. So, no, no one was looking at that. No one was looking at just the egregiousness and the, “Let’s look at the impact.” I mean, too often, we hear these things about companies, $27 billion, they did something wrong, but we failed to kind of zoom in on the individual impact to the customers, right? So there were all these customers that then had all these problems now, because now they had these fake accounts that were opened in their names that were not true.
And, so, these employees, perhaps some of them knew something was wrong. And we’ll talk about this, but didn’t have the ability, the courage, the wherewithal to dissent. And they looked at it, “Well, this is my job.” But, instead, they ended up doing something illegal, while they didn’t have a good choice, doing something illegal is something that’s never good.
And we saw a Wells Fargo-type of situation with Volkswagen. Engineers put on software so it could cheat the emission standards, right? So they could meet these kind of budgetary requirements. We saw it in General Motors, delayed recalling ignition switches, concerned about replacement costs, and people lost their lives or were seriously injured. So there’s real consequences here, to this unethical and illegal behavior. And it’s not just that the company may go down.
Linda Ashar: Right. Consequences are much far reaching than that. Is this the way we have come to expect that business shall operate? What’s the answer? Is the onus on employees to pay attention to what they’re being asked to do and step up with the risk that goes with that? How does an employee deal with that kind of controversy within themselves?
CJ Sherman: Yeah, wouldn’t it be great if we can solve this now? So we don’t keep seeing these cases. It’s kind of like I say to myself sometimes with discrimination, also unethical and becoming illegal behavior, right? So it’s not just about money, but also discrimination. I say to myself, “Are we still doing this? I can’t believe we’re still doing this.”
And yet we keep having company after company engaging in this type of behavior. And that’s why that kind of psychological component of, “How could this still be happening?” These are smart, intelligent, sophisticated people working at the company and leading the company. And somehow they think that they are never going to be caught.
And I’m going to get to your point, but we also see that it’s, I think in some ways, harder for leaders often to point out these problems, because they’ve bought into the whole brand and the culture of the company. It’s their family. So to speak out and say that your family is doing something wrong, no one wants to admit that you have a family member, perhaps, that’s not doing something right. So it’s often up to these lower-level workers to speak out because they might not be as invested in the kind of wearing the team jersey as those higher-level managers.
What often does call to the workers, people below the managers, to dissent, to speak out? That takes enormous courage. I haven’t been in that situation, but I don’t know if I would have the courage to do it. But what I would say to these workers and to these companies is that, clearly, as we know in life, if you keep doing the same thing and it’s not working, there’s no point in doing the same thing. So, obviously, the way these companies are functioning and that these problems keep occurring, what’s proceeding right now is not the direction that we want to go in.
So, what should be happening for these workers is one, they shouldn’t be concerned about retaliation. And that’s often a fear of speaking out, “There’s so much for me to lose. I could lose a promotion. I could get terminated.” There’s been instances of people saying that it wasn’t about a promotion or they got terminated, but it was about then they got cut off from all the social events, and kind of their workplace was their life. And that was a big deal. We know that there’s that continued fear of retribution that workers shouldn’t have.
And companies need to change that. Some of the other companies that were involved in similar types of scandals had hotlines. We all have heard, “Well, go to human resources. There must be a manager you can go to.” Often, these workers did do that. And then their concerns were pushed aside. Nothing happened. We know that there has to be a better system than that.
A better system might be one, having a system in place when that worker starts, that they are told, “If you have a problem, you need to come to me, the manager. And if I’m the one doing something wrong and I’m going to be transparent to you, so it’s okay that I’m telling you this and it’s okay to go above my head, you need to then talk to Susan or Kevin or Bob. Those are the people that then could help you, because that’s not the way we want to have our company operate.”
And they need to repeatedly send this message. Because otherwise, again, you get into that conflicting messaging situation where we’re told to meet these aggressive sales goals, but we’re also told to comply with our code of conduct and our code of ethics.
Structurally within a company, there needs to be this emphasis on reporting and that you in fact are doing good for the company as opposed to being shunned by the company, because that’s often what happened. They’re not seen as heroes, which perhaps weeks or years or months later, they may be by the public, right? The person who pointed out that the hospital was cutting corners, or the company was lying about the profits that they were actually earning.
So there needs to be that, and there needs to be in companies, some type of independent review on a continual basis, that they get reviewed and they get held accountable. Because right now, we see most companies have one leader in charge and that’s where we often have a problem.
Getting back to Wells Fargo, the CEO at the congressional hearing, and I think it was 2018, noted, “I don’t care about the process. I care about outcomes.” And right there, it’s kind of a red flag, that that’s deeply concerning. I mean, he acknowledged this at a congressional hearing when he’s supposed to be explaining why the company fell into this scandal, why this stuff happened, “What are you doing Wells Fargo to make things better?” And if that’s the mindset, that, “I don’t care about the process, and I only care about the outcomes,” we’re not going to get to where we want to be for our employees.
Linda Ashar: And that’s where I was coming from, is this the business as usual mentality, and it doesn’t seem to be that way, at least from comments like that, that we hear. But the outcome that is the elephant in the room, that that leader is not addressing is, the ultimate damage to the business from when it hits the fan publicly. Wells Fargo lost a lot of customers, apparently not enough for them to be damaged enough, but they did lose customers. That’s an outcome that should have been a concern to a company, it seems to me. What am I missing?
CJ Sherman: Yeah, that’s what’s so stunning and so striking. I mean, Wells Fargo has been in existence since 1852. That’s a long time. You think they would’ve learned a couple of things along the way. And it gets back to your point, how could these leaders do this when they know that in the long run, there’s going to be severe consequences?
The same with GM and ignition switches, and Volkswagen. I mean, how could they not know that they would get caught? That this would catch up to them and that there would be severe consequences to their brand?
But somehow, we lose our moral compass and our brain doesn’t allow us to think in that rational way and think of those long-term consequences. We’re more concerned with that instant gratification, right? Money, power, prestige, we’re more concerned about that and thinking about the greater desire to serve myself as the leader of the company, as opposed to the greater good.
Linda Ashar: Well, if I’m an employee in a company that appears to be engaging in some sort of conduct that I find unethical, perhaps even illegal, what can I do to protect myself if I want to blow that whistle?
CJ Sherman: That’s a great question. Well, one, let me say, I’m certainly not giving legal advice to anyone, but I’d want to say for myself, here’s how I would handle it. And it’s a suggestion for all of us to keep in mind if we’re confronted with this situation.
First, I would certainly “paper” myself. And what I mean is document everything. So we often tell people about something later and someone will say, “Well, what year was that?” It’s important to document everything. When you start seeing something that’s not right, make note of it. When did this happen? Who said it to me? What did they ask me to do? Of course, be careful. You don’t want going to have all this on your company computer, but make a personal note of it somewhere.
Next, when you start out with a company, see if there’s someone there who you feel you can trust, a mentor type of person. Of course, I recognize that mentor type of person may be the person that you then become concerned about. But, hopefully, there’ll be someone that you can talk to, that can be a sounding board, because you need that.
Too often, these employees just got caught up in the culture and too often, the leaders blame the culture, this kind of vague thing, instead of identifying a person or a particular thing that caused a problem. They blame it on a culture of a problem in the workplace. Companies have a culture, but it comes from the top. So have someone to talk to, document everything.
And certainly, if there is a set of guidelines within your company, that you’re supposed to go to human resources and you’re supposed to talk to person X and person Y, certainly do those things. And then you have to make a choice. And this is not always easy. You can continue to do the things that you know perhaps in your heart and even on paper that you know are wrong. So you can continue to do that. And I recognize that that’s not easy to make that choice, but the other choice is you can leave. And that’s also a hard choice, because you have family, you have bills, and you want to get ahead in your life.
And I’m certainly not suggesting to anyone to go ahead and quit, but both are bad choices, right? But staying means that you’re going to be engaging in behavior that’s unethical, if not illegal. Or you could move on to a new company, save your brand. So it’s not on your resume that you worked at Wells Fargo during that period and stayed there and engaged in behavior.
So those are your options. Neither one is a good option and it’s a horrible position to be put in, but there are heroes out there who did blow the whistle, if you will, and called companies on it. And depending upon what the circumstances, some were handsomely rewarded for speaking out and some suffered greatly for it. There are great risks for speaking out. So you have that option of staying there and engaging in the behavior, speaking out, but taking risks, or moving on to another company and kind of cutting your losses.
I know these aren’t great answers. I wish there was a perfect answer, but as with anything in life, when you are with someone who’s doing something wrong, there are no easy choices to make.
Linda Ashar: And the flip side of that question is: If there sometimes a leader at the top, or at least at the top levels, cannot be the driving force of an unethical threat of conduct in the company, but can be somewhat oblivious to it. If nobody’s reporting it and there’s not an easy way to detect it.
You mentioned a little earlier about having an independent review. It seems to me that a company that’s sincere about its code of conduct, its code of ethics, could engage in that kind of review process. If not annually, certainly, maybe at least every couple of years, although it strikes me annually might be a good benchmark, to take the temperature of its culture, as to how it is practicing its business. Are you aware of any companies that do that or how they do that?
CJ Sherman: Well, I know that Wells Fargo identified that they were doing that, but I don’t know of a lot of companies that are doing that or being transparent and saying they’re doing that on a regular basis. I wish that more companies would just be really public about it. That that would be part of their brand, in saying, “We’re an honest company, this is what we do.”
But instead, we often have slogans and say, “We’re doing the right thing. We’re an honest, decent company.” And there’s been articles that Wells Fargo employees said that a lot of what Wells Fargo did in the aftermath of that initial scandal was just PR, that nothing really changed. And so, just saying to employees, and I know the Wells Fargo, one of the leaders did say this, “Well, I want workers to talk to me.” That’s not enough because most workers are probably still afraid to say things.
I really think it has to start at the beginning. And I mentioned about having a culture where when you start there, to say to your workers, “Come and talk to me.” And we know that we’re told about the kind of chain of command and if you have a complaint, we know all those rules, but there has to be something more put in place more than just typical training of observing videos, but actual kind of role playing, of pretending like, “Hey, Michael. I’m told that you’re upset about something that Mark was doing.” And kind of doing those role playing on a regular basis to kind of normalize it, to normalize speaking out and to normalize dissent.
Because, after all, we know that dissent has been a good, right? We know throughout history. Again, going back to even issues with discrimination, the civil rights, those few people who spoke out made such a huge difference. And we, hopefully kind of, if you will, normalize or welcome that dissent in time and then more people joined in.
Linda Ashar: And another positive aspect of that is, the better communication, the better understanding of what the business processes and practices are in the first place. Because a given employee can be mistaken in viewing a certain act or policy as being improper because the employee doesn’t understand it, or it’s not anything wrong with it, but it goes against that particular employee’s view. And communication can be enlightening about that, “Oh, I understand that now. I didn’t think of what we were doing in that way.” Does that make sense?
CJ Sherman: Yeah. And I think along with that, managers, along with the people who work there, again, the consistent message has to be not just, “We want you to meet certain sales quotas,” but, take a step back. “Is this following our company guidelines? Is this following company policy? Is it compliant with the rules, the regulations under the Security and Exchange Commission or the SOX, Sarbanes–Oxley?” I mean, that should be done on a regular basis. And too often, we’re kind of sprinting ahead without kind of stopping along the way to do a status check, if you will, on the conduct that we’re engaging in.
Linda Ashar: Well, this discussion has offered a lot for both employers and employees to think about. And I see two major perspectives. One is how business handles ethical dilemmas and employee misconduct. The other is employees’ response to pressure from employers, as we’ve been discussing, for example, in the Wells Fargo case. Whether through a supervisor or a perceived policy to do something a certain way that doesn’t feel right, that results in engaging in illegal or unethical conduct.
We need wrap up. So I’d like to ask you, CJ, I really appreciate your comments, they’ve just been excellent. What would you add as a final thought to leave with our listeners on this topic?
CJ Sherman: One, I wanted to share with you, I don’t know if your listeners remember Senator John Ensign, Republican from Nevada. He resigned in a scandal, trying to pay off a staff member that he had an affair with. And we know that’s illegal under their rules and unethical. He was also married, that’s a moral issue against his values. So he was forced to resign. And he was in a position of power; he was seen as someone who might run for president.
And one of the things he said, when he was resigning in Congress, he said, “Oftentimes, the more power and prestige a person achieves, the more arrogant a person can become. My caution to all of my colleagues is to surround yourself with people who will be honest with you about how you really are, and what you are becoming, and then make them promise to not hold back, no matter how much you may try to prevent them from telling you the truth.”
And that’s what leaders need at every level, from the smallest company to the biggest company. You need people to say, “You’re wrong. You are wrong. And here’s why.” And when you have that leader pushing that person aside, you need another layer. You need the next person to say, “Nope, I’m going to support what she said. You are wrong. And this is not aligned with our brand, with our ethical code, with our ethical conduct or with the laws.”
Linda Ashar: Thank you, CJ. And to everyone listening out there, I leave you with this question: “What is your ethical game plan?” This is Linda Ashar, host for this podcast, thanking you for being with us today. Please tune in again for more podcasts on this channel.
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