Despite audit and compliance professionals often having a simple job of ensuring regulatory and compliance stability, there are times where some individuals may break off from the pack.
This can often be seen in cases of fraud and other misdeeds within an organisation. When this discover by any employee, it becomes vital that they speak up. However, the growing stigma and potential for punishment for ‘whistleblowers’ means some individuals can feel uncomfortable with speaking truth to power.
In a recent post by Diligent, the company outlined the reasons and ways that organisations can and should create a safe channel for whistleblowers to come forward.
The company remarked, “Rather than fearing these whistleblowers, business leaders should encourage open communication and create systems to address problems internally. Today’s stakeholders — which include not only investors, but also employees, customers, partners and vendors — expect and demand ethical behaviour, which is why it’s so important for companies to address problems from within, before they’re called out for inaction or accused of a cover-up.”
Diligent recently gathered three whistleblowers at the 2022 Modern Governance Summit. These included Sherron Watkins – who blew the whistle on the fraudulent accounting practices of Enron in 2002, Cynthia Cooper – who helped expose $3.8bn in fraud at WorldCom also in 2002, and Frances Haugen, who disclosed tens of thousands of Facebook’s internal documents to the SEC in 2021.
According to Haugen, whistleblowers can help to create a system of checks and balances within an organisation, so building safe channels for them to speak up is vital.
She said, “Lies are liabilities, and they will eventually be exposed. Investors are starting to wake up to this idea that if there isn’t transparency, there can be liabilities. There are now employees who have seen courageous people come forward, and they have blueprints for how they can unburden themselves from those lies. That’s why businesses must have a plan for getting closer to the truth.”
Watkins added, `If word needs to get out that if you don’t have the right systems in place, employees will go outside and you will be caught,” she said. Diligent highlighted that while various laws at both state and federal level are designed to protect whistleblowers, many still face termination, demotion, mistreatment from coworkers and a host of other punishments.
“We need to build cultures from the bottom-up. When you have a culture where people feel like they have to lie or hide things, that’s a cognitive load on their shoulders,” said Haugen. “People aren’t going to be able to work well, and you’ll have higher turnover. People even at the very bottom levels should be able to have honest conversations with their managers.”
Back in 2010, the SEC’s whistleblower program went into effect, offering direct awards to individuals that voluntarily submit information on violations, while the EU also issued its own Whistleblower Directive last year.
Diligent said, “While such measures have helped to reemphasize the importance of whistleblowers and the need to protect them, organizations must work internally to build their own culture of compliance that empowers every employee to use their voice.”
How can companies create an effective whistleblower program? According to Diligent, there are four key steps.
First of all, businesses should begin with evaluating their culture. Companies that want to create an effective whistleblower program must start by looking within and reassessing their values.
Cooper detailed, “In our capital markets, we’ve historically been very driven by shareholder, rather than stakeholder, interests, and meeting short-term earnings guidance and driving executives to make decisions that aren’t necessarily in the long-term interest in the company. You need to assess your current culture, define your purpose, move toward a stakeholder view and then start building a bridge to transform your culture.”
Secondly, firms must build channels for direct feedback from employees. Reporting should be an easy and straightforward as possible – which means making the program accessible via multiple platforms and reducing unnecessary barriers.
Diligent said, “Organisations should have systems in place that simplify incident reporting, automate case management, and allow for secure and discreet follow-ups.”
Next, companies should try to protect confidentiality to fullest extent. Often, because of the perceived threat of retaliation, a guarantee of confidentiality is vital for most whistleblowers – and they should feel confident that their anonymity will be preserved. This also helps to further promote a culture of open and honest communication.
Lastly, Diligent noted it is important to create a zero-tolerance policy for retaliation.
The firm said, “When employees feel they can speak up without fear of retaliation, they’re less likely to take their concerns outside the company.
Organisations need to ensure that their whistleblower programs clearly communicate zero tolerance for any type of retaliatory or discriminatory action. But promises aren’t enough — if any attempts at retaliation do arise, disciplinary action must follow.”
Read the full post here.
Earlie this year, Diligent partnered with Q4 to provide pre-IPO and public companies with IR and board governance solutions.
