A few years ago, my team and I were launching a leadership development program for a client. Just before we launched the pilot program, the company was hit with a high-profile scandal. A couple of rogue executives were caught playing around with the company’s finances and millions of dollars went missing. The ensuing scandal rocked this once-great company, leaving its reputation in tatters. The executives were charged.

When we kicked off the pilot session a few months later, the scandal quickly became the elephant in the room. It was clear the participants needed a forum to express their personal views on those events. We could feel their deep-seated anger, and we realized we had to bring it out into the open.

Many of the participants admitted they were now embarrassed to work for the company. Others said they were once so proud of where they worked that they now felt empty inside. There was another group of leaders who felt a real sense of resentment; they feared that the reputation of all of the company’s leaders was negatively tainted. They were already seeing a change in relationships with customers and vendors. Trust had eroded.

What I took from this experience is how all employees are affected by a scandal. I have noticed over the years that when stories of scandal break out in the media, the attention is often on the bad leaders involved – sometimes just the CEO — or about the impact of the reputation damage on the company’s financial prospects. Stories about the GM recalls often target current CEO Mary Barra; debates about Uber’s ethics revolve around a handful of senior executives; and in the past, discussions of Enron and Lehman Brothers focused on a few key players.

But a scandal affects all of a company’s employees in significant ways. In fact, there is new research to suggest that the impact of a scandal is far more significant, especially on lower-ranking employees, that anyone would have ever thought.

Researchers call this the “moral spillover effect.” In a paper published in Social Psychological and Personality Science, Takuya Sawaoka and Benoît Monin show what happens when good, ethical people find themselves connected to unethical organizations. In a series of studies, they found that regardless of the type of transgression – eg, a self-serving lie like inflating one’s own performance to get a bigger bonus, as opposed to an organization-serving lie like lying to a client to boost revenue – the transgressor’s colleagues were still viewed with suspicion, even when they hadn’t worked with him directly.

And Sawaoka and Monin found an even stronger spillover effect when the transgressor was a leader. In that case, his colleagues were viewed even more negatively – and less likely to be hired by other companies in the future – just by virtue of having worked for the same organization.

Sadly, it’s quite likely that this research will do nothing to change the behavior of the corporate leaders who are the source of the scandals. These are, by their nature, either very selfish people who either aren’t concerned about who gets hurt from their misdeeds, foolish people who never expect to be caught, or amoral people who don’t understand why what they’re doing is wrong. Asking these leaders to think of all the collateral damage that will be done to their co-workers is simply a non-starter.

But in the narrative of most business scandals you will find instances where good people stood by and did nothing as the bad people cheated, stole, defrauded, or threatened others. Would this research convince them to speak up when confronted with evidence of unethical or even illegal behavior?

Sometimes, even good leaders can convince themselves it’s not their responsibility to blow the whistle on a colleague. But as the research above clearly shows, if you don’t, you’re likely to be tarred with the same brush as the people who actually authored the wrongdoing.

For any leader, it’s not enough to be personally ethical. You must make sure that the colleagues that you work with day in and day out are also ethical. If doing the right thing isn’t motivation enough, remember: their behavior will hurt your reputation.

This blog first appeared on Harvard Business Review on 12/04/2014.

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