Yesterday I considered an article by Ryan Hubbs, entitled “10 Factors Leading to Reporting Mechanism Distrust”, in which he detailed 10 factors leading to hotline distrust. Today I want to pick up on that article with Hobbs' tips for building a trusted hotline reporting program and culture, talk about the SEC whistle blowing program, and conclude with a few thoughts on why experienced, invested counsel is so critical in these.
Organizations implement and maintain hotlines, trusted programs, hotline programs differently depending on their sizes, cultures, geography, and many other factors if they must decide if they'll construct such programs. Many organizations find benefit to taking it outside from the experience and expertise, the appearance of independence which can increase employee trust. A smaller organization may not be able to do so. Nevertheless, there are many competent companies that put on hotline services for small individuals.
What can you do to help build trust for your reporting system?
1. Training and awareness. Increased awareness of the program will help build employee's confidence around it, and organization should continually strive to help employees know that the hotline reporting system program works, why the organization believes in it, who operates it, and why it's a critical part of the culture of the company and the compliance ethos of the company. Organizations should include hotline frequently asked questions and answers for all employee new hires and supervisory training.
Next, is an assessment on whether the ethics and hotline policies, procedures, and technology are meeting the needs of the organization and the employees. Here let me emphasize technologies, because I earlier about a situation where an employee does not have access to a computer. What if the employees are out on a drilling rig? Would they have access to a cell phone, or could they report in that manner? Maybe not. They may have to use a computer. You must have the appropriate technology for your diverse workforce.
What about after the report is made? Are your internal investigations and resulting disciplinary actions consistent with the organization's desired culture of compliance? Here you need to make sure that the actions you have taken really are consistent because employees understand this and they will watch and see what happens. Are independent reviews conducted by internal audit or external professionals with ongoing oversight by an audit committee of the hotline and results? Finally, are complaints and resolutions disclosed to or discussed with external auditors? Are you bringing in outside experts to help you?
All of this is important because of Dodd-Frank and its creation of a Whistleblower program for securities violations, such as the Foreign Corrupt Practices Act (FCPA) for issuers. As of April, of 2017, the Securities and Exchange Commission (SEC) has made 43 whistle blowers awards of over $153 million to whistle blowers under the Whistleblower program established under Dodd-Frank. This is a direct result of failure of corporate hotlines. Any regulator will tell you that 95% of all employees attempted to report internally first and they were either rebuffed, they were retaliated against, or in some other way rejected. The amount of money, fines and penalties, paid out for ignoring whistle blowers, people who report anonymously, is significant.
Finally, as I end this one-month series, I would just like to re-emphasize the need for experienced investigative counsel for serious matters. Recently had a declination issued in the Linde Gas case by the Department of Justice (DOJ), and it really was clear that the counsel used by Linde in in addition to the decision self-disclose, was a critical factor in Linde getting the superior decision it did, which was a declination to prosecute. The investigation was a very difficult set of facts, very convoluted, very muddled up over many countries with shell companies, direct companies, and others. You really must have experienced investigative counsel for things that are outside the routine. Having an experienced, season and competent FCPA bar-lawyer who could both investigate it and negotiate with the government is very critical going forward.
Three Key Takeaways