But longer time periods to close cases suggests constrained resources and raises the risk that employees may doubt their concerns are being addressed
Sometimes big efforts yield big rewards. Employers have spent lots of time and resources in a bid to motivate employees to report on suspected missteps related to accounting, audit, finance or the misuse or misappropriation of assets. Those endeavors appear to be paying off.
NAVEX Global's 2014 Ethics and Compliance Hotline Benchmark Report found that employees are increasingly using internal whistleblower reporting programs, and that substantiation rates of these reports overall jumped to 45 percent in 2013 from 33 percent in 2009. Companies are receiving higher quality reports that contain sufficient information to complete investigations into alleged misconduct. More than half the reports that specifically concern accounting, audit, finance and misuse or misappropriation of assets are being substantiated.
Higher substantiation rates suggest contradictory conclusions regarding a company’s culture, according to Carrie Penman, chief compliance officer and senior vice president of advisory services at NAVEX Global. ‘[Either] there is increased trust in the internal reporting system or there is lower confidence in line management's ability to respond appropriately.’
The report suggests that ethics and compliance programs are getting stronger. What’s also noteworthy, according Penman, is that the rate of repeat reporters has doubled over the past five years and their reports are now substantiated at higher rates than those of employees reporting for the first time. Repeat reporters are also more likely to give accounts of issues related to accounting, audit, finance and misuse/misappropriation of assets.
‘This is important because managers and executives have a tendency to believe that repeat reporters are 'malcontents' bringing false or frivolous claims, when in fact, they are raising actionable concerns,’ says Penman.
Because the quality of reporting is so high, Penman believes it could be beneficial to use an alternative term to ‘whistleblower’, which carries a negative connotation in the workplace and invites a negative response that can include retaliation. ‘This includes peer-to-peer retaliation, which can be more prevalent and insidious,’ she says. Whistleblower can be synonymous with informer, mole or snitch. ‘This label is detrimental to the cause or providing executives and boards with the opportunity to respond to an issue before it causes serious organizational harm or is taken outside to a government agency, the media, or outside counsel. If we truly want employees to raise issues, we should start with a more respectful approach,’ says Penman.
The encouraging report doesn’t mean there was nothing worrisome in the findings. The increase in the number of days to close a report rose from a median of 30 days to 36 days over the past five years. ‘Every additional day an employee is left wondering whether their concern has been taken seriously represents a risk to the organization,’ Penman warns. Even HR-related reports are now taking nearly a month to close. This could be attributed to more thorough investigations, or insufficient resources available to address the higher volume of incoming reports, she surmises.
In light of the findings, what should corporations do? Penman says corporations can extend the positive trend by assuring employees with words and actions that the company will follow up on their concerns and enforce a policy of no tolerance for retaliation. Companies should publish sanitized cases of issues addressed to help demonstrate actions taken, she says.
In addition, companies need to invest in sufficient resources such as properly trained HR and compliance personnel who are able to respond to the increasing number of reports. The extended time it is taking to close cases is a red flag suggesting firms may have resource constraints, says Penman.
Penman has recommendations for corporate boards, too. ‘Pay attention to your organization's reporting statistics, outcomes and trends and learn how to read the data like you read the company's balance sheet,’ she says. ‘This data can often provide an early warning of brewing issues or compliance risks.’
She also urges directors to obtain data with context that shows trends over time and includes information from individual lines of business, as well as company totals. Boards should ask questions about how significant matters have been handled and request specific information on reports of retaliation.
It’s critical that boards ‘consistently hold executives accountable for management of the [whistleblower] program and for appropriate and timely response to issues found, including consistent discipline for similar offenses,’ she adds.
