Companies Warming to Internal Whistleblower Reporting Programs, But Not Doing Enough to Support Them

By Marlene Koury

A recent report shows that internal whistleblower reporting programs are getting stronger.  Companies are continuing to invest in the development of these programs as a way to ferret out fraud and misconduct.  And more and more employees are stepping up and reporting misdeeds, providing higher quality tips than ever before.  But as concerns are being shared in record numbers, the report also notes that organizations are often too slow to follow up on the leads.  If the trend continues, employees are likely to lose confidence in reporting programs and either stop reporting altogether or take their gripes elsewhere (i.e., the government or the press), which typically makes matters significantly worse for the company.

This comes from NAVEX Global’s 2014 Ethics and Compliance Hotline Benchmark Report, which periodically reviews the internal compliance programs of thousands of organizations in dozens of industries, reflecting all types of reporting, including online, phone hotlines, in-person, mobile and email. The report shows the highest level ever of employees reporting internally and the highest percentage of tips being substantiated.  Employees raised a variety of concerns through these reporting programs, including misconduct or fraud relating to accounting, auditing, financial matters, business integrity, and health and safety.  The substantiation rate was highest for reports concerning misuse of assets—56 percent.

The increase in quality tips appears to be a direct result of companies investing in reporting programs to catch problems before they escalate.  But as companies are working hard to put these programs in place, the report shows that they are not doing enough to respond to the whistleblower tips generated by these programs. This has the potential to undermine these programs by signaling to whistleblowers that their employers do not take their complaints as seriously as they should.

Perhaps most importantly, the report notes that companies who invest in internal reporting are beginning to reject the perception of whistleblowers as disgruntled employees and instead embrace them as just the opposite—loyal employees who have the best interest of the company at heart.  Carrie Penman, NAVEX Global’s chief compliance officer, cautioned that a company that does not share this changed perception of whistleblowers or provide a trusted outlet for reporting misconduct “risks being blindsided by a major crisis that employees saw coming, but that no one shared with leaders who could have helped.”  Companies would be wise to heed this admonition and based on NAVEX Global’s newest findings, it appears that more and more of them are.