Rising numbers of mortgage defaults, growing business inventories, declining consumer confidence, falling interest rates, and roller-coaster trading sessions—without question, few economic indicators are heading in the right direction these days. Regardless of the terminology we will ultimately use to define this period in our economic development, it also doesn’t appear that the situation is going to change anytime soon.

If you are like me, you read the headlines and think about your credit cards, retirement fund, and property value. But are you thinking about the ethics of the situation?

You should be. After all, our current situation is ethics-related. Whether any of the events that put us in our current economic funk broke any laws or regulations outright remains to be seen. Regardless, the situation is laden with ethics-related decisions. Ethics is always involved if the outcome of a decision affects another person.

And no matter how they are packaged, mortgage securities do affect investors, lenders, and borrowers. The choice of individual mortgage loans to offer a borrower has a direct effect on the quality of life for the potential homeowner. Even our decisions as consumers, as we manage our credit cards and retirement portfolios, carry consequences not only for our own quality of life, but for the financial well-being of many other people we don’t even know.

Where we go from here is ethics-related, too. Relief efforts for overburdened homeowners, interest rate cuts by the Federal Reserve, and our decisions regarding our investment strategies all affect many other people, and so they are ethics-related.

With all these ethics issues swirling around our companies, thinking about the days ahead for your organization is important as well. Believe it or not, getting through economically challenging times does carry implications from an ethical perspective. Things may well get more difficult. Will your internal controls hold?

Think about it:

Economic pressure produces ethics pressure. When employees feel pressured to commit misconduct on the job, usually the reason for that pressure is related to fears of job loss, or need for a quick financial gain. According to the National Business Ethics Survey conducted by the Ethics Resource Center (of which I am president), almost 60 percent of employees who feel pressured to commit misconduct cite “keeping their job” as a reason. For 35 percent of employees, “saving others’ jobs” was a significant factor. Four in ten employees are motivated to commit a violation to advance their own financial interests.

When ethics pressure exists, misconduct occurs. Nine out of ten employees who feel pressured enough to think about committing misconduct report that they observe misconduct taking place. In other words, where there’s smoke, there’s fire.

We also know that some of the business shifts that begin to take place in economic downturns—acceleration of mergers, acquisitions, layoffs, and severe organizational transitions—yield not only big change inside a company, they also bring an 11 percent rise in misconduct among employees.

What does all this mean? Given our current economic state, misconduct is likely to rise. Here are some scenarios:

An employee manipulates the books to relieve the burden of heavy debt at home;

Employees disregard regulation to get the job done, for fear that if they don’t make their targets they will be next in company layoffs;

Customer service begins to wane because employees are stressed and concerned about their personal financial situations;

Employees withhold bad news for the boss to paint a rosier picture than really exists.

The good news is that there are some things you can do now to circumvent these kinds of situations. How can you help your organization prepare?

Over-inform, rather than under-inform. One of the biggest factors in mitigating the pressure employees feel to commit misconduct is the extent to which they believe they know what is going on in the company. Err on the side of talking too much. When employees feel informed about such things as the economic outlook for the company, management’s strategic plan, lessons learned, and the availability of resources to help, levels of misconduct drop.

Temper management. Supervisors can be a double-edged sword with employees, especially during difficult economic times. They are the single biggest source for the pressure employees feel to commit misconduct. At the same time, they are also the primary recipient of reports of violations: 43 percent of all reports of observed misconduct go directly to bosses. Educate your management teams about how they can be both a help and a hindrance, and how the tone they set (of either support or pressure) is amplified during stressful and transitional times.

Spare your ethics program. Employees are less likely to observe misconduct during transitional business times if there is an ethics and compliance program in place. They will make use of your program, provided there is one. If and when budget cuts come, don’t eliminate your saving grace; protect your program resources.

Study your business cycle and helpline reports. It is likely that certain employees observe certain types of misconduct at different times in your organization’s business cycle. Tap into your existing data and see if you can find and anticipate these patterns.

Expect reports of misconduct. Misconduct is likely to rise during the next few months, and hopefully employee reports of wrongdoing will rise too. Keep in mind that most reports will not come to your anonymous helpline. In fact, only 3 percent of all reports are made using that channel. Educate management on the kinds of employee reports that constitute ethics or compliance misconduct, and create mechanisms for that information to reach your desk.

The essential element in weathering turbulent economic times is information—flowing downward in the form of company updates, and upward in the form of reports of misconduct. Anticipate that this season will bring additional pressure for your employees and act now to circumvent the situation.

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