The following scenario is disturbing and occurs all too often – a company receives a hotline report of misconduct occurring in its operations in a foreign country, India, for example.  The company launches an internal investigation of the matter and substantiates the allegation.  Financial misconduct occurred, discipline is imposed, two employees are fired and minor adjustments are made to India’s operations.  End of story, case closed, good job everyone, let’s move on.

This sounds familiar, right?

Okay, so now let’s take a different approach.  The hotline report identifies potential financial misconduct in India.  The internal investigation reveals that two employees were involved in financial misconduct and ended up stealing money from the company.

Let’s ask an important question.  How did the two employees carry out the scheme?  Who was responsible for supervising or managing them?  What role, if any, did these supervisors play in the scheme or why didn’t they discover the misconduct?

These are important questions.  Employee misconduct does not occur in a vacuum.  Supervisors failed to detect the problem.  The investigators need to ask these important questions and determine exactly where the breakdowns occurred.

But that is not all – what precise controls applied to the activity?  How were they circumvented or how were the actors able to carry out the scheme?  In some cases, a specific control may not be properly crafted to address the situation and the procedures need to be modified.  In other cases, the actors were able to circumvent the control, and the question needs to be asked – how did they circumvent the control? What additional steps need to be taken to make sure it does not happen again?

Wait, there is more.  Two employees engaged in misconduct.  The company’s hotline system worked – their conduct was reported and substantiated.  Do we believe that other employees may be engaging in similar misconduct?  To answer that question, some additional financial testing may be warranted to ensure that other employees may not be engaged in similar wrongdoing.

Even if the answer is no, we do not believe that other employees are engaged in the same misconduct, there is another important question.  How did our company’s ethical culture in India contribute to the substantiated misconduct?  This is often not an easy question to answer.  It requires some soul searching and honest answers.  In many cases, employee misconduct may be the tip of an even bigger problem, one that can be easily detected through some basic investigation steps.  It is worth the expenditure of additional resources to make sure the misconduct is isolated and not part of a bigger problem.

You may ask – now, can we close this matter?  Not yet.  What about the employee reporter?  Have we informed the employee reporter that his report was substantiated and appropriate actions were taken? 

If so, we have to take additional steps to ensure that no one retaliates against the employee reporter.  We have to remind everyone involved that any retaliation will not be tolerated and the company will respond quickly and aggressively to any direct or indirect attempts to retaliate against the reporter. 

We are getting closer to the end, but guess what, now we have more follow up, additional monitoring of remediation and close supervision of the employees involved to make sure there is no retaliation, subtle or overt.