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New Report Highlights Effectiveness of Private Sector Whistleblower Programs

Posted  March 12, 2015

By Marlene Koury

A recent report shows internal whistleblower reporting programs are getting stronger and more effective.  As companies continue to invest in the development of these programs, whistleblowers are encouraged to report fraud and misconduct, providing higher quality tips than ever before.  But as concerns are being shared in record numbers, the report also notes 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 2015 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 data encompasses 2.2 million reports over the past five years—representing 32 million employees at more than 4,600 companies—the largest repository of ethics and compliance-related data in the world.

The report shows the highest level ever of employees reporting internally and the highest percentage of tips being substantiated.  Over the last five years there has been a significant rise in the reporting rate—a 44 percent increase since 2010.  The continued rise in reporting may be attributed to a number of possible trends, including: ethics and compliance programs continuing to mature; increasing employee confidence that reporting will make a difference; and executive leadership being held more accountable for ensuring that ethics and compliance programs go beyond a “check-the-box” approach.

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.  Although the substantiation rate for accounting, auditing and financial reporting issues dropped by 10 percentage points over last year — and below 50 percent for the first time in several years – the overall substantiation rate increased by 10 percentage points in the previous four years and remained at that highest level in 2014.

One of the most noteworthy findings relates to reports of retaliation. While there was no significant increase in employee reports of retaliation in 2014 (5,189 compared to 4,594 in 2013), the substantiation rate for those reports increased 125 percent over 2013 (from 12 percent in 2013 to 27 percent in 2014). This significant increase may be a sign that ethics and compliance program leaders are taking a more serious approach to managing and investigating allegations of retaliation.

Carrie Penman, NAVEX Global’s chief compliance officer said, “retaliation is perhaps the one compliance violation most likely to do irreparable damage to a company’s culture and employee morale…retaliation is personal and strikes at the heart of an employee’s well-being: job assignments, pay and their sense of ‘belonging’ in the workplace community. It stifles transparency, erodes trust in leadership, eliminates future reports and, at its worst, it drives the disenfranchised employee outside the organization and into the arms of regulators.”

Tagged in: Financial and Investment Fraud,