We asked industry experts, colleagues and compliance officers what they believe will be the top issues impacting workplace ethics and corporate compliance programs in 2015. We gathered their best thinking and prepared our annual summary of trending issues and the steps you should consider taking as you plan for the coming year. We’ll share each of the trends here over the next few weeks.
Last November, the U.S. Securities and Exchange Commission issued its Annual Report to Congress on the Dodd-Frank Whistleblower Program. It is clear that the program is going strong. Following are five key ways compliance professionals can address issues raised in the report, and stay ahead of trends:
1. Compliance officers need to ensure that they can track and measure the progress, timeliness, quality and outcomes of their internal cases. And, as the SEC does, organizations should maintain an open channel of communications with employees and consultant reporters throughout the process—even with those who are anonymous. In addition, as we found and reported in our 2014 NAVEX Global Hotline Benchmarking Report (representing data from thousands of internal hotline reporting systems), the median numbers of days to close a case has recently jumped from 30 to 36 days, which is a red flag that delays in investigations could lead to more reports going to the government.
2. Do all you can to encourage whistleblowers to report internally first. The SEC report states that, to date, more than 40% of the individuals who received awards were current or former company employees. This seems low as most expected that reports of original information which would likely qualify for an award would come from insiders with specific knowledge of wrongdoing. What is not surprising is that, of the award recipients who were current or former employees, most had raised their concerns internally to their supervisors or compliance personnel before reporting their information to the SEC. In our culture assessment work, we often hear from employees that they would much rather raise the issue internally to their manager than take it outside. And, our 2014 benchmarking data showed that 40% of all reports received by our clients internally were substantiated either all or in part. This confirms that companies generally do get the opportunity to resolve issues internally—the question is whether they will take this opportunity or miss it.
3. Bolster your commitment to eradicating retaliation. There isn’t an employee in your organization who doesn’t gauge the potential for retaliation when considering raising an issue. The Office of the Whistleblower is taking this issue head on. In 2014, the Commission brought its first anti-retaliation case. Of course addressing fears of retaliation—and training managers and supervisors on recognizing and avoiding it—should be a top priority for any compliance program whether the SEC is focused on it or not.
4. Get rid of roadblocks to reporting. Both in recent remarks and in the report, Sean McKessy, the Chief of the Office of the Whistleblower highlighted that they have been “working to identify employee confidentiality, severance, and other kinds of agreements that may interfere with an employee’s ability to report potential wrongdoing to the SEC.” The report references Rule 21F-17(a) under the Exchange Act that provides that “[n]o person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement…with respect to such communications.” While it may only be a paragraph in the report, Mr. McKessy has said that the agency is “looking for the first big case here” and “we will continue to focus on agreements that attempt to silence employees from reporting securities violations to the Commission by threatening liability or other kinds of punishment.”
5. Assess and address global whistleblower risk. Finally, the report offers some interesting demographics on who is reporting and their geographic locations. The report notes that during 2014, the Commission received submissions from individuals in all fifty states, as well as from individuals in 60 countries. The highest numbers of international reports are coming from the U.K., Canada, Australia, China, and India with the most coming from the U.K. (70 reports). As noted above, after a lengthy study by a commission formed by the Bank of England and the U.K. Financial Conduct Authority (FCA), the commission rejected U.S.-style “bounties” for individuals who report financial crimes to government authorities. We will see if this decision is revisited based on the U.S. Office of the Whistleblower report.