By: Meg Shreve, Medill News Service

October 13, 2005, CBS Market Watch

WASHINGTON (MarketWatch) -- Despite a host of formal ethics programs established by companies, a survey released by the Ethics Resource Center Wednesday reported misconduct in the work place continues and employees are less likely to tell supervisors about the violations.

The center, a research institute funded by individuals and corporations that studies organizational ethics, reported that 52 percent of employees had witnessed at least one instance of misconduct at work. Of those who saw abuses, only 55 percent reported misconduct to management, down 10 percent from 2003.

Among the most common violations noted by employees: 21 percent saw abusive behavior directed at an employee, 16 percent reported safety violations, 11 percent witnessed theft and 12 percent observed discrimination.

"The need for attention to ethics has not diminished," Patricia Harned, the center's president, said in a conference call.

As companies adjust to a scandal-sensitive climate, many firms have attempted to address misconduct by incorporating formal compliance and ethics programs into the corporate culture.

"More companies are addressing ethics in the workplace," Harned said.

"This was not a surprise to us given the emphasis by regulations and by the public for companies to be doing something to encourage ethical conduct."

According to the report, 73 percent of employees had a way to report unethical conduct, and 88 percent said their company disciplined misconduct. Sixty-seven employees reported that ethical conduct is included in employee evaluations compared with 74 percent in a 2003 survey.

While companies struggle with creating an ethical business culture, business schools are attempting to teach corporate ethics.

"It's not so much about doing the right thing anymore," said Daniel Diermeier, a professor of reputation management at Northwestern University's Kellogg School of Management, said. He said that it is important for schools to focus on teaching the real-life situations that businesses face. For example, Kellogg requires second-year students to take a week-long, intensive course in which students are peppered with situations that demand ethical decisions.

Harvard's Business School requires students in their second year to take a business class that applies ethical, legal and economic considerations to practical managerial decisions that students will face in the business world. According to Harvard professor Lynn Paine, students should look at the scenarios as "tools they need as leaders to make good on their responsibilities."

Diermeier stressed that having an intensive class that focuses on ethical questions is essential, but education is not the final step.

Companies must work toward integrating their values into every level of the company.

"If you don't integrate them, it just becomes an afterthought," he said. Diermeier suggested that businesses focus on tying values such as trust and accountability to the hiring process, evaluations, promotions and even dismissals.

Some companies have taken advice like Diermeier's a step farther. Two years ago, the auditing and management consulting firm Deloitte & Touche LLP created a senior position to oversee ethics issues and compliance.

"Name any scandal in the last 10 years," said Harold Tinkler, the chief ethics and compliance officer. "There were dozens of people who knew what was going on."

The key to implementing an ethical standard, Tinkler said, is creating an environment in which ethics are valued and employees feel comfortable speaking up when they see misconduct. At the New York-based firm this approach has included a helpline for employees to report violations and ethics training sessions for new employees, which continues into the company's career training.

'Most people want to work in an ethical place," Tinkler said.