A colleague once told me a story about an unfortunate incident that occurred during settlement negotiations with a government agency. During his presentation designed to demonstrate his client’s robust compliance program, he mentioned that the client had an ethics hotline for employees to call and report misconduct. To verify the legitimacy of the hotline, the government attorney stopped the meeting and called the hotline number—which was out of service. Not surprisingly, my colleague now calls a client’s hotline number before every settlement negotiation with a government agency.
I was reminded of this story after reading two surveys published by the Ethics Resource Center regarding workplace misconduct and whistleblowers. While the surveys include a variety of interesting findings relating to workplace misconduct, I found their discussion of external reporting to be particularly surprising.
As many readers remember, during the Dodd-Frank Whistleblower Program rulemaking, the private sector raised numerous and vocal concerns regarding the Government’s decision not to require whistleblowers to report internally prior to contacting the Government. Many critics have argued that offering a reward without requiring employees to report internally undermines company compliance programs. The surveys’ results demonstrate that these concerns may be overblown.
For example, both surveys indicate that the vast majority of employees choose to report internally, while only a small percentage of employees file their first report with someone outside the company. Indeed, over 50% of employees prefer to report to someone they know or trust, such as their supervisor.
When is an employee more likely to report misconduct outside the company? The surveys highlighted several common factors, such as the severity of the misconduct or the employee’s perception that management’s ethical culture or commitment is weak. In addition, many employee-reporters indicated that they are likely to report outside the company if they believe the company is not responsive to their internal report. In companies that do not provide anonymous or secure internal reporting mechanisms (such as a hotline), employees are three times as likely to report only to sources outside the company.
These findings suggest that companies strongly influence an employee’s motivation for reporting internally. Companies can and should take steps to increase the likelihood of internal reporting, such as increasing awareness of the resources available to employees, and acknowledging, rewarding and supporting employees who internally report misconduct. And, perhaps most importantly, if companies offer and promote anonymous reporting hotlines, they should work…..
The surveys, The National Business Ethics Survey® of Fortune 500® Employees: An Investigation into the State of Ethics at America’s Most Powerful Companies and Inside the Mind of a Whistleblower, may be downloaded here at no cost with registration.
Jessica Tillipman is a contributing editor of the FCPA Blog. She’s the Assistant Dean for Field Placement and Professorial Lecturer in Law at The George Washington University Law School. She also teaches an Anti-Corruption seminar that focuses on corruption control issues in government procurement.