As the 10-year anniversary of the Sarbanes-Oxley legislation approaches, former U.S. congressman Michael Oxley continues in his pursuit to shed light on corporate America’s wrongdoings and make them accountable for their unethical actions.
Oxley, who is chairman of the non-partisan, nonprofit group The Ethics Resource Center (ERC), released a new employee survey which has found that workplace misconduct at Fortune 500 companies is higher than the U.S. average.
Oxley said Fortune 500 companies are leaders in our economy and they need to be ethical role models: “These CEOs set the tone at the top. Nothing is more important to Fortune 500 companies than leadership and ethics. They set the standards in the world. This study was important because they need to be the ethical leaders.”
Oxley said he is optimistic on the survey’s outcome because out of the 965 employees surveyed, they all recognized the importance of ethical behavior, and he credits Sarbanes-Oxley for helping lay that ethical foundation. “Because of Sarbanes-Oxley, leadership in those corporations now have to sign off [on] the financials and pledge they are accurate. This pledge has encouraged ethical behavior not only from the down and up but across the company as well.”
Breaking down the results of the survey, misconduct was higher at private companies than at those that are publicly-traded businesses. But while the number of misconducts has increased, there has also been more reporting. Of those surveyed, 52 percent of Fortune 500 companies said they observed misconduct in their workplace during the last 12 months but 74 percent of those employees reported the misconduct when they saw it.
Oxley said the reason why there has been more reporting in Fortune 500 companies is because they are providing comprehensive ethics and compliance programs, creating a strong ethics culture. “The corporate culture has improved dramatically.” He explained. “The concept, tone from the top and overall culture. We will still have some bad actors. But on the whole, there has been a dramatic improvement across the board.”
But even with the culture improving in promoting ethical behavior, fear of whistle-blower retaliation is still a real concern. The study showed whistleblowers were slightly more likely to experience retaliation at Fortune 500 companies than at companies in the U.S. overall.
“The Sarbanes-Oxley whistleblower provision came as a result of the bad treatment the Enron and WorldCom whistleblowers encountered,” he said. “We were cognizant of that and wanted to strengthen the provisions. Now, you have this combination of employees being emboldened by the law, and companies are promoting that ethics is good for business. It’s had a remarkable effect and this survey shows this.”
Topping the list of misconduct was bribing clients — 70 percent of the acts that were reported — and the least reported was conducting personal business on company time, which came in at 38 percent.
Reflecting on the 10-year anniversary of his landmark legislation, Oxley is optimistic on the future of corporate America’s culture, but has warned that the consequences of unethical behavior have already taken a toll on the markets.
“Sarbanes-Oxley is not just a law. We have changed a culture. We pushed for strong ethics. We now have the structure in place for these corporations to address misconduct and new leaders understand the potential liabilities," he said.
“We did not try to fix the world with Sarbanes-Oxley. When it comes to the Madoffs of the world, Lehman and the like, they are a different kind of problem, but at the end of the day, they add up turning off the individual investor. They are reading these headlines and the conclusion they come to is the stock market is not a game for them. They would be a sucker. So you see so many people getting out of the market. It’s a blow to raising capital and generating jobs.”
With the 10-year anniversary of Enron approaching, Oxley said as time goes on, people’s memories fade, but he does not want anyone to forget how close to the brink the markets were. “People have forgotten about Enron and WorldCom. It was a trying time for American capitalism. We lost 8 trillion in stock value. Anniversaries like Sarbanes-Oxley tell us where we are and where we come from.”
Lori Ann LaRocco is a CNBC Sr. Talent Producer and CNBC.com columnist; aithor, "Thriving in the New Economy." Coming out in Oct. 2012: "Dynasties of the Sea: The Shipowners and Financiers Who Expanded the Era of Free Trade" (Marine Money).
Column: C-Suite Insider
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