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CORP EXEC BOARD : Research Reveals That Integrity Drives Corporate Performance: Companies With Weak Ethical Cultures Experience 10x More Misconduct Than Those With Strong Ones

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09/15/2010 | 02:05pm CEST

ARLINGTON, Va., Sept. 15 /PRNewswire/ -- The Corporate Executive Board (NYSE: EXBD), a leading research and advisory services company, today released new data that indicates integrity has a tangible impact on corporate performance. Findings demonstrate that companies with weak ethical cultures experience 10 times more misconduct than companies with strong ethical cultures. Through its research, CEB has uncovered key drivers of cultural integrity and its role in risk. CEB recommends corrective actions to help companies reduce their risk profiles in order to enhance corporate performance and increase shareholder return.

Amid increased public and regulatory scrutiny around corporate misconduct, culture is largely underappreciated as a source of organizational risk. CEB research shows, however, that the most effective preventive measures start from within the corporation, such as ensuring open communication between employees and managers and building trust in leadership.

"Operating in an ethical culture may seem like a given, but for many companies creating one is an uphill battle," said Dan Currell, managing director of Corporate Executive Board's Legal and Compliance Practice. "In an ethical culture, employees feel comfortable speaking up and voicing their concerns, and they trust their colleagues will do the same. To make this happen, leadership has to set a tone that inspires trust in their own ethics and in their willingness to hear and respond to concerns. Unfortunately, many employees today fear retaliation for reporting misconduct, which prevents ethical cultures from thriving and prevents businesses from reaping the rewards."

Based on a survey of approximately 500,000 employees in more than 85 countries, CEB found that corporate cultural integrity not only reduces employee misconduct, but can greatly improve business performance overall. For example:

    --  Companies with strong openness of communications deliver shareholder
        returns an average of five percent higher than their peers;

    --  Managers who exhibit corporate values can improve employees' performance
        by 12 percent; and

    --  Employees in high-integrity cultures are 67 percent less likely to
        observe significant instances of business misconduct, such as accounting
        irregularities and insider trading, than those at companies with
        low-integrity cultures.

"The traditional risk management processes provide a false sense of security," Currell added. "As a result of our research, CEB recommends that companies evaluate and understand their employees' perceptions and actions to reduce their risk profile and improve corporate performance."

Corrective Actions

Companies that actively address cultural integrity within their organizations can reduce overall risk. CEB has identified seven attributes that drive integrity perceptions within organizations and contribute significantly to companies' risk profiles. By surveying employees around these key attributes, companies can identify concerns and reduce risk both at the company and at the business-unit level.

To learn more about CEB's findings on corporate cultural integrity and the key attributes for addressing cultural integrity risk, visit www.executiveboard.com/legalandcompliance.

About The Corporate Executive Board

The Corporate Executive Board Company drives faster, more effective decision making among the world's leading executives and business professionals. As the premier, network-based knowledge resource, The Corporate Executive Board provides customers with the authoritative and timely guidance needed to excel in their roles, take decisive action and improve company performance. Powered by an executive network that spans over 50 countries and represents approximately 85% of the world's Fortune 500 companies, The Corporate Executive Board offers unique research insights along with an integrated suite of exclusive tools and resources that enable the world's most successful organizations to deliver superior business outcomes. For more information, visit www.exbd.com.

SOURCE Corporate Executive Board

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