Weak cultures result in more fraud

New research by the Legal and Compliance Practice of the Corporate Executive Board (CEB), based in Washington, D.C., finds that organizations with weak ethical cultures experience 10 times more misconduct such as fraudulent acts than companies with strong ethical climates. Setting the Stage: The Importance of Culture for Risk Management and Business Success (PDF), based on a CEB survey of the behaviors of approximately 500,000 employees in more than 85 countries, also concludes that:

· Organizations with strong, open communications deliver shareholder returns an average of 5 percent higher than their uncommunicative peers.
· Managers who model the organization’s strong ethical values can improve staff performance by 12 percent.
· Employees in high-integrity cultures are 67 percent less likely to observe significant instances of business misconduct, such as accounting irregularities and insider trading, than those at companies with low-integrity cultures

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