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Business leaders prioritise company performance over ethics, ILM research reveals

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Britain’s bosses are prioritising profits over principles, according to the Institute of Leadership & Management (ILM) Index of Leadership Trust, released today.

The survey, in association with Management Today of more than 2,500 workers reveals half of respondents (50%) believe their employer puts financial goals above ethical considerations, with 48% and 44% saying the same of their chief executive and line manager.

With the ethical behaviour of organisations under increased scrutiny, the research explores how staff within large companies rate the ethics levels of their bosses.

The results show that less than a third (30%) of CEOs of organisations with over 1,000 employees are seen by their employees to have ethics at the heart of business decisions, while just 36% believe them to have high ethical standards.

Peter Cheese, chairman of the ILM, said: "With the banking crisis, the phone hacking scandal and the outcry over MPs expenses, the ethical behaviour of leaders and their organisations is under strong scrutiny. It is an increasingly critical issue that impacts brand image, trust and business performance. Employees, customers and shareholders expect ethical values to be at the heart of business decisions. The fact that so many leaders and organisations are perceived not to have that is a cause for serious concern and attention."

The results also show almost a fifth (17%) of public sector employees believe their organisation operates less ethically today than three years ago. In comparison, 11% of private sector employees and 8% of third sector staff feel the same.

Surprisingly, the group which has seen the greatest improvement in ethics levels work in financial services, banking and insurance, where almost half of staff (46%) say the industry has changed for the better in the last three years. Least impressed are workers in national and local government where 21% feel activities have become less ethical since 2008. This is closely followed by the utilities, post and telecoms sector at 20%.

"It is heartening to see some employees report their organisations have become more ethical in recent years, especially those within financial services, banking and insurance", added Cheese.

"These sectors have been under the microscope since the recession hit and their employees feel their leaders have responded to the criticism they faced. Naturally profit is the main concern for most organisations, but the challenge for today's leaders is to make it clear that ethical principles can deliver improved performance and enhance profit margins."

The 2011 Index of Leadership Trust is the third annual barometer of trust levels within British business. Another key finding from this year's research is that public sector bosses remain the least trusted. Public sector CEOs score just 67 points out of a possible 100, compared to 72 points for bosses from both the private and third sector, suggesting that public sector leaders are failing to effectively tackle the problems their organisations are facing.

These low levels of trust in the public sector are compounded within public sector organisations with over 1,000 staff, where CEOs score just 55, seven points behind bosses within large private sector businesses, who receive a score of 62. Third sector bosses are the most trusted on 65 points. Overall trust in CEOs has increased in 2011, up four points to 66 from 2010 and up six points from 56 in 2009.