The Dodd-Frank Act Solutions

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In a recent customer discussion with a large technology firm, the Chief Compliance Officer reminded me of a story that demonstrates the problem the Dodd-Frank Act is attempting to solve.

A group of people are asked to go into a dark room and touch what they find there – an elephant. Each one feels a different part, but only one part, i.e. the side or the tusk. They then compare notes and learn that they are in complete disagreement as to what was in the room.

Resulting from Sarbanes-Oxley Act (SOX) guidelines, organizations have been tasked with implementing whistleblower hotlines to provide employees with a confidential avenue to report wrongdoing.  These hotlines provide a small fraction of the complete picture of organizational risk across the enterprise and often are seen as a “last resort” communication channel.  Most companies provide a variety of other channels for employees to report issues (including managers, human resources, and company leadership), but fail to effectively document this information.

From my point of view as an employee in a leadership position, I believe it is critical to the success of our business that we have a great company culture.  Not only does a great culture give me confidence that we provide a great product, but it provides stability for people and their families and enables employees’ personal work experience to be fulfilling and meaningful.

Do we need the Dodd-Frank Act?

It surprises me that Dodd-Frank was needed in the first place.  Don’t business executives around the country all strive to operate businesses with a great corporate culture?  I guess, as a person who pays attention to recent media headlines, the answer would have to be “no.”

Recent studies including “Big Headlines, Not-So-Big Impact” from the Society of Corporate Compliance & Ethics (SCCE) found that almost 70% of respondents would not be changing their program at all as a response to Dodd-Frank.  So if fraud is still prevalent, are we to assume that SOX did not work and that Dodd-Frank is additional legislation attempting to force businesses to implement a greater degree of transparency?  I believe the answer is “yes” and that the compliance community should consider the broader ramifications.

If we are only measuring whistleblower hotline report volume, we really have no idea of what is truly being reported within our own organizations.  According to the Compliance & Ethics Leadership Council, 80% of the data that provides a clear picture of enterprise risk is being lost, stuck or siloed, and not being gathered to create a complete picture.

In addition recent study by the National Whistleblowers Center found that almost 90% of employees who eventually seek litigation initially reported their concerns internally, either to a supervisor or the legal/compliance department.

This information demonstrates how the failure to adequately capture and respond to employee concerns increases the risk of escalation to government channels and the potential for significant costs related to litigation, fines and damage control.

Avoid Dodd-Frank Act Fines: Combat Complacency

  • Increase awareness and strengthen internal communications about how, what and where to report. This reduces the likelihood employee will report to the federal government or seek outside legal counsel.   A strong program also gives the organization a defensible position during a legal action or investigation by the government. Consider an internal marketing campaign and employee surveys to increase feedback and knowledge.
  • Demonstrate Greater Visibility: Gain a more complete picture of actual risk events being faced by your organization by increasing documentation and consistency across all channels. Value: company can take care of issues before they get out of hand reducing likelihood of morale issues or litigation exposure.  Streamline investments in training, education and other risk mitigation strategies.
  • Create a streamlined issue management processes to ensure consistent handling and successful resolution of issues. Value: happy employees, ensures employees are treated fairly and consistently creates a better, more productive work environment.
  • Improve Employee Perception:  Defined as “organizational justice” by the Compliance & Ethics Leadership Council, leading companies show employees that when unethical behavior is uncovered, people are held accountable and the company does the right thing.  Consider writing a blog or posting stories to help employees get clarity on your vision and tone of your culture.
  • Engender strong employee confidence in monitoring programs.  This results in higher productivity, lower turnover and better brand integrity which, according to the Compliance & Ethics Leadership Council, yields 5.8% higher shareholder returns.

Dodd Frank Act Webinar

The Dodd-Frank Act includes a new provision that introduces substantial incentives to internal corporate "whistleblowers" who report instances of fraud to the U.S. Securities and Exchange Commission SEC. Now, the failure to adequately capture and respond to employee concerns increases overall employer risk.

Check out our archived webinar to view the components of our Dodd-Frank solution and how it provides your most relevant employees with the case management tools and repeatable processes they need to most effectively comply with Dodd-Frank regulations.


What do you have to say? Share your thoughts in the comments below or join a discussion group on Compliance Next.

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