Rob Swystun, Pristine Advisers
Companies can prevent dilemmas caused by whistleblowers by cultivating an environment where employees are encouraged to report wrongdoing internally, a new report says.
Written with compliance officers in mind, a whitepaper from compliance software company The Network entitled “Embracing Whistleblowers: Understand the Real Risk and Cultivate a Culture of Reporting” outlines the “stereotype” of the corporate whistleblower (at least in the eyes of compliance officers) as a disgruntled, low-level employee out to get revenge on a company for some kind of perceived wrongdoing who is looking for a huge payday from the Securities and Exchange Commission.
However, data the report cites actually shows whistleblowers to fit the stereotype everyone else has of them of being average employees higher up on the corporate ladder (usually in a supervisor or higher-level management position) who have witnessed corporate misconduct and who just want to do the right thing.
In fact, the report says 92% of whistleblowers actually attempt to report the misconduct they see internally before ever thinking about reporting it externally, just 20% of whistleblowers end up disclosing their concerns to outside sources, and only nine percent actually report the misconduct to the government. Research from the University of North Carolina shows the primary reason whistleblowers go outside the company is fear of retaliation rather than the desire for a big payday from whistleblower bounty programs.
“The reality is that most whistleblowers are simply trying to do the right thing and more likely than not tried to report their concerns to their companies long before they ever went to a government regulator,” the report authors write. “That means you have a chance to uncover and address the vast majority of potential issues before regulators, the media, or lawyers ever get involved.”
While almost all employees try to take their concerns to someone inside the company first, 65% said they would go to a third party if their internal report was ignored by the company and an even higher percentage would go outside the company if keeping quiet would cause harm to people or if the crime was a big enough one to warrant external reporting.
The fear of retaliation causes many employees to keep quiet about misconduct they see or drives them to report it to an external party, The Network’s whitepaper says, adding that one in five whistleblowers experienced some kind of retaliation from their companies after internally reporting misconduct. That’s 6.2 million people who were effectively punished by their own companies for trying to bring some kind of misconduct to their companies’ attention.
This retaliation (or the fear of it), “drives employees into the arms of investigators — and makes it less likely that you will learn of a problem while there is still time to address it internally,” the whitepaper says.
To ensure that employees (and subcontractors) feel comfortable reporting misconduct internally, The Network recommends encouraging what it calls a “speak-up culture” within the organization, which will help the company learn about potential problems before they get too big and will actually lead to a decline in misconduct.
Facilitating a speak-up culture involves the training of senior management and providing employees and subcontractors with the tools to effectively report misconduct and get those reports acted on.
Here is a summarized version of what The Network recommends in its report:
- Encourage senior leaders to take misconduct reporting seriously and to act with the utmost integrity at all times.
- Train middle managers on your Code of Ethics and critical risk areas.
- Make sure middle managers understand how to report an issue brought to them by an employee (and have systems in place to do this).
- Provide managers with training about how to have ethics and compliance-related conversations and make sure they know how and what to document, who to give the report to and what kind of incident reports meet your escalation criteria.
- Create and publicize a quality hotline reporting program so employees know it exists and that it actually works if they use it (meaning it actually has to work).
- Along with cultivating a culture of speaking up, also cultivate a culture of ethical behavior using every means at your disposal, including training managers on what constitutes retaliation and how to avoid it and having an anti-retaliation policy.
Even if a company has all of these steps in place, there is one last piece of advice to share, but this comes from lawyer Richard E. Condit via a comment on the CFO.com article about The Network’s report and it’s for employees who are considering reporting misconduct.
In his 25 years of experience working with whistleblowers, Condit claims, he has seen more than a few companies who use their internal reporting systems as bait to catch employees who report misconduct.
Therefore, regardless of the systems, policies and procedures in place in a company, any employee thinking about reporting misconduct should get legal advice from a lawyer not associated with the company on how best to protect themselves when reporting misconduct.
Whistleblowing will continue to be a necessary part of corporate culture as long as there is misconduct that needs to be reported. But, by fostering a culture of both speaking up and acting ethically, companies can identify wrongdoing and deal with it long before it causes huge headaches.