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Five Important Steps in Putting Together a Whistleblower Compliance Program

The stakes are high.  Everyone knows that.  The FCPA paparazzi likes to write about the importance of creating compliance programs to address the real risk to companies of SEC whistleblowers. 

Everyone agrees on the basic list of compliance improvements: changing the corporate culture and seeking to persuade the whistleblower to believe in the corporation’s commitment to responding to the whistleblower’s specific complaint.  All that is well and good, but we have to be realistic.  Money makes the world go round and the financial incentives are very hard to ignore – whistleblowers and their attorneys will be looking for a financial payoff.

Companies have to respond to the risk and prepare for an increase in whistleblower complaints.  Here are some suggestions for how to respond to this risk:

1.  Focus on personal reporting of complaints.  Studies have confirmed that employees who learn about misconduct report their concerns to their supervisors in approximately three-quarters of the cases.  Anonymous hotlines are not trusted by employees who want to report misconduct.  As a result, supervisors need to be trained on how to encourage misconduct reports, how to respond to a complaint and how to ensure that the complainant feels that he or she has been heard.  In these situations, it is imperative that supervisors avoid any appearance of retaliation against the complainant.  Supervisors need to be trained and counseled on these issues.

2.  Spread the word on response to complaints.  Senior management needs to emphasize through regular reports how it has responded to internal complaints, the importance of such complaints, and the overall success to the company of the complaint process.  While respecting privacy, companies can report and publicize the results of a complaint and internal disciplinary actions.  If the company demonstrates the importance of internal reporting to its overall mission, this will encourage employees to report complaints to their supervisors.  It is absolutely critical to recognize the importance of such reporting and appreciation for employee reports.

3.  Make sure it is easy to report issues internally.  Whistleblowers want to see action taken within the company.  When employees have trouble even reporting their concern or getting a response from the company, they become frustrated and are more likely to report to the government.  Companies need to encourage reporting and make the process as easy as possible.  The reporting system needs to be tested and must ensure that complaints are heard and responded to quickly and effectively.  All the rules in the world will mean nothing unless managers know how to listen, how to report and elevate issues of concern.  If employees perceive the system as working, they will trust it and report their own concerns.  If hey do not trust the system, they will be more likely to report to the government.

4.  Evaluate your internal reporting system.  Companies need to monitor and assess their internal reporting systems to ensure they are operating effectively.  Standards need to be set and met.  Specific reporting channels should be measured on at least a quarterly basis and compared to make sure that there is no significant changes.  Employee surveys on perceptions of intyernal reporting should be included in any assessment program.

5.  Explain the investigation process in detail.  Companies should provide employees with a detailed description of how the internal complaints are investigated.  The more transparent the process the more fair the process will look and the more employee buy-in will occur.

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