Most Unethical Behavior Goes Unreported and Unresolved

U.S. perceptions of the honesty and ethical standards of nearly two dozen professions are nearly all down compared with measures from 2019. These findings, along with the historically low faith in U.S. institutions Americans have expressed in recent years, reflect heightened public awareness and media coverage of alleged ethical violations within major U.S. organizations.

When made public, ethical violations can ruin an organization’s credibility, tank recruitment efforts and cause a major hit to the bottom line. Moreover, Gallup’s most recent study on the frequency and impact of unethical behavior within U.S. organizations finds that unchecked and unmanaged ethical standards can sap employee engagement and erode cultures -- whether or not this behavior is made public.

Unethical Behavior Erodes Culture and Engagement

Unethical behavior varies widely in severity, from disparaging a coworker to securities fraud. Overall, nearly one in four U.S. employees (23%) say they have personally seen or have first-hand knowledge of their colleagues or manager demonstrating unethical behavior in the past year. These findings were collected in a nationally representative May 2024 Gallup survey of 21,543 employees.

Increased exposure to ethics violations is a symptom of failing management and an unhealthy organizational culture that hinders employees’ ability and desire to show up and perform at work every day.

Employees with first-hand awareness of unethical behavior in their organization are 2.7 times as likely to be actively disengaged and 2.3 times as likely to be burned out as their peers.

Awareness of poor ethical practices may also lead employees to detach from their organization and seek a different opportunity. Employees with first-hand awareness of unethical behavior within their organization are 70% less likely to strongly agree that they are connected to their organization’s culture. These employees are also 45% more likely to be watching for or actively seeking another job.

A Majority of Unethical Behavior Goes Unreported and Unresolved

When unmitigated and normalized, ethical violations can compound and fuel the unhealthy cultures that enable them in the first place. For example, if one employee is not addressed by their manager after cutting corners in a quality-assurance process, it signals to others that they can do the same without consequence and promotes the perception that other unethical behavior will go unpunished too.

Less than half of employees (43%) who had first-hand awareness of unethical behavior in the past year within their organization say they reported it -- whether directly to someone in their organization or via an anonymous tip.

Among employees’ top reasons for not reporting unethical behavior, 22% say they thought no action would be taken, 20% say they were afraid of retaliation, and 9% had previously reported a compliance or ethics issue and it was not a good experience. The data suggest that, in most cases, unreported unethical behavior could be reported -- but a limited number of organizations empower their employees to report unethical behavior or instill confidence that their reports will be satisfactorily addressed.

Employees at all job levels are exposed to unethical behavior at similar rates. However, there is a distinct gap in the likelihood that leaders and managers versus other employees report unethical behavior. Fifty-five percent of leaders and managers with first-hand awareness of unethical behavior report it, and less than half of other employees (39%) do the same.

Managers Are Key to Building Cultures of Ethical Behavior

Half of employees who have reported instances of unethical behavior (50%) turned to their manager first. Managers are the first line of defense against unethical behavior on their team and in their organization. Those who build a strong culture of ethics and integrity can flush out unethical behavior and greatly diminish the likelihood that it will occur in the first place.

A 2021 Gallup study of Germany’s workforce found that when managers model integrity, regularly facilitate conversations about ethics and integrity with their team, and appropriately react to unethical behavior when they see it, they significantly decrease the likelihood that unethical behavior will occur.

Gallup’s latest study of U.S. employees suggests that this model can drive the same positive effect in the U.S. workforce. Most critically, employees who strongly agree that their manager fulfills all three of these behaviors are 72% less likely to report that they have first-hand exposure to unethical behavior.

Despite these benefits, most managers and organizations have not fully tapped into the benefits of building a culture of ethical behavior. Most U.S. employees (53%) do not strongly agree that their manager fulfills any aspect of building a culture of ethical behavior.

Managers who model ethical behavior and appropriately address unethical behavior set the tone and clarify standards for the team. They inspire confidence that ethical concerns will be handled but also create a healthy culture, deterring fear of consequences for unethical behavior. Candid conversations about ethics and integrity among team members further calibrate how team members are expected to work together toward goals and create a foundation of deep trust.

Teams that establish a strong culture of ethical behavior are often led by managers who are in tune with other best practices that drive employee engagement and satisfaction.

Employees whose managers fulfill all three aspects of building a culture of ethical behavior are 3.2 times as likely to be engaged, 3.8 times as likely to strongly agree that their organization cares about their wellbeing and 4.7 times as likely to strongly agree they are connected to their organization’s culture.

Strong cultures of ethics establish a foundation of trust and psychological safety between employees that also elevates how well they collaborate, connect and share feedback with each other. When ethical standards are clearly defined, well-intentioned employees may also feel more emboldened to innovate, take calculated risks and try new things with the confidence that they are still acting within the ethical guidelines of their organization.

Get Ahead of Unethical Behavior Before It Happens

Unchecked unethical behavior is a persistent drain on any team’s morale and engagement. When ethical standards are not discussed, modeled or enforced, an organization will likely see decreased engagement, struggle to retain talent, and risk facing catastrophic backlash from a public that is increasingly disenchanted by companies and institutions. By encouraging and supporting managers to build a culture of ethics on their teams, organizations can significantly reduce risk from unethical behavior while simultaneously boosting employee engagement.