Owners and operators of non-residential construction companies in the United States face a daunting challenge when it comes to developing and maintaining high ethical standards. According to a recent Ethics Resource Center report on ethics in the construction industry, construction companies are much more susceptible to ethical missteps than those in many other industries.

Key survey findings

The ERC study, entitled “National Business Ethics Survey of the U.S. Construction Industry,” consists of nearly 3,000 general contractors, subcontractors, and program managers who were asked to provide their views of ethics in their workplaces. Key survey findings include:

• 18 percent of construction industry employees said they felt pressured to compromise ethical standards, compared to 13 percent in other industries.
• 53 percent indicated they had witnessed misconduct, compared to 48 percent in other industries.
• 37 percent stated they experienced retaliation for reporting misconduct, compared to only 22 percent in other industries.

The size of the company also has a direct impact on the potential for risk. For instance, in construction companies with 500 or more employees, 40 percent of the workers felt pressured to compromise ethical standards, compared to only 12 percent in companies with 24 or fewer employees. The actual construction site is where ethical violations are more likely to occur, as 43 percent of respondents said they witnessed ethical violations on the job site compared to 31 percent at the company office.

It is interesting to note that 74 percent of the survey respondents indicated they actually reported misconduct upon witnessing or experiencing it, which is higher than the 65 percent average across all other industries.

Common types of unethical behavior

According to the ERC, a likely reason why construction operations and their employees are more likely to cut ethical corners than other industries is the intense pressure they face to complete projects on time and under budget. Actual ethical violations can take on many forms. Here is a ranking of the five most commonly witnessed unethical behaviors in the construction industry:

• Abusing or intimidating actions toward others
• Conflicts of interest
• Failure to correct working conditions to comply with health and safety regulation
• Wasting company resources
• Violating OSHA guidelines

There are also significant differences between what is witnessed and what is actually reported. The top five reported ethical violations include:

• Creating fictitious business deals, vendors, or invoices
• Engaging in uncompetitive business practices
• Inappropriate disclosure of private customer information
• Inappropriate sharing of confidential company information
• Manipulating or falsifying financial reporting information

Steps to improve employee perception

While the construction industry has made significant strides to improve the ethical climate in recent years, it still has a long way to go. The survey points out that less than 45 percent of employees believe their company has a well-developed and effectively executed ethics and compliance program.

The good news is that in situations where companies have placed a stronger focus on ethics, employees feel less pressure to compromise standards, observe fewer incidents of misconduct, and experience a decrease in retaliation against reporters. The combination of a strong ethical culture and an effective ethics and compliance program is viewed by the ERC as the best way for an organization to mitigate its risk.

Highlights of an effective ethics and compliance program

The ERC suggests construction industry companies should adhere to the seven criteria outlined by the Federal Sentencing Guidelines for Organizations (FSGO) that were implemented in 1991 to serve as a blueprint for all organizations to follow when developing an ethics and compliance program. These are:

• Developing standards and processes that help to reduce the likelihood of criminal activity
• Ethics and compliance program oversight should be undertaken by high-level members within the organization
• Exercising due diligence and care in the delegation of substantial discretionary authority when dealing with ethics-related matters
• Effective communication and training at all levels of the organization
• Developing and implementing systems for monitoring, auditing, and reporting misconduct, including methods to protect reporters against retaliation
• Fair and consistent enforcement of ethics compliance standards
• Taking appropriate steps to respond to incidents when they occur and to reduce the likelihood of repeat incidents

What specific steps can your company take to improve ethics and compliance?

The ERC also recommends specific actions that individual construction industry companies can take to improve ethical performance:

1. Develop a well-crafted ethics and compliance program based on the FSGO standards. Special emphasis should be placed on assisting employees with managing the inherent pressures involved in completing construction projects so they won’t have to resort to engaging in unethical behavior.
2. Assess your organization and operation to identify specific work groups and job sites that are susceptible to risk of misconduct.
3. Focus your resources on areas/key players that tend to have the biggest impact on ethical performance in construction operations. Depending on your organizational structure, this can include on the job response to misconduct, job site supervisors, union employees, program managers, and middle managers.
4. Ensure on-site employees have access to ethics resources and information that can guide and support them should they face ethical dilemmas. Examples can include codes of conduct, reporting hotlines, and training materials.