This is the first article of a two-part series on corporate whistleblowing. This installment examines the issue from the company’s perspective, while the second feature focuses on the whistleblower’s point of view.
If your company wants to be alerted to internal wrongdoing, it takes more than offering your employees an anonymous whistleblower hotline, according to experts at the McCombs School of Business.
In the case of National Security Agency whistleblower Edward Snowden, the government certainly did not want the whistle blown publicly on their surveillance programs. But within companies, corporate executives usually want to hear about internal problems, says McCombs Lecturer Grace Renbarger, who spent four years as the chief ethics and compliance officer at Dell.
“They can’t stop it if they don’t know about it,” she says.
Many large companies offer mechanisms such as ethics hotlines that enable workers to anonymously report misconduct. Under the Sarbanes-Oxley Act, which was passed in 2002, all publicly traded companies must have mechanisms for the reporting of accounting or audit fraud.
But those hotlines don’t always get used. According to NPR, research from the University of Michigan shows that as many as one in five workers report observing violations of their companies’ code of conduct, even though only half of the employees spoke up about the violations.
Why don’t more employees report wrongdoing? One problem could be a corporate culture that discourages it. To get more employees to speak up, “you have to tackle the culture itself,” says Associate Professor of Management Ethan Burris.
Whistleblowing Isn’t Easy
The consequences of becoming a whistleblower are “generally pretty awful,” says Robert Prentice, professor and interim chair of the Business, Government, and Society department.
Prentice explains that whistleblowers are often shunned by coworkers, may be fired, and can have difficulty finding work in their industry ever again.
Some companies require whistleblowers to file an internal report before they can go to outside regulators, such as the Securities and Exchange Commission, at the risk of being discredited by their employer. Unemployment, combined with years spent in court battling former employers, can drag whistleblowers into bankruptcy. In the most extreme cases, whistleblowers may be the victims of physical intimidation or even murder. There is speculation, for example, that the 1974 death of nuclear safety activist Karen Silkwood may have been linked to her public opposition to unsafe practices at her company.
“Being a whistleblower is far from rosy,” Prentice says.
Things may not turn out so great for the company, either. Employee whistleblowing can potentially mean fines, lawsuits or government investigations of the company, Prentice says. If the whistleblowing case isn’t handled well internally or high-level executives are involved, expect the press to pick up on it. “You’re going to hear a lot of publicity about the really catastrophic ones,” Renbarger says.
Just ask the NSA.
For companies, it’s important to get workers to speak up before problems get too serious.
Companies should consider how they are soliciting employee input. Renbarger says most large U.S. corporations have toll-free hotlines or Web portals managed by third-party vendors that allow employees to blow the whistle while remaining anonymous.
Some experts say more needs to be done. Anonymous hotlines are important “symbolic actions,” but they aren’t enough, says Burris, who researches how employees share feedback in the workplace. “To me, that is really just sticking a Band-Aid on the underlying issue,” Burris says.
A hotline doesn’t change the wider corporate culture that not only allowed wrongdoing to occur, but also made the employee feel the need to seek out an independent third party, either inside or outside the organization, to resolve the issue, Burris says.
Changing Corporate Culture
Instead, Burris says employees should be talking about serious workplace problems with their managers. The company can encourage discussion by letting workers know that it’s safe and worthwhile to speak up about sensitive issues, and by letting managers know that it’s safe and worthwhile to address problems and make changes, rather than continuing with the status quo.
“Unless you have both pieces involved, you’re not really going to change the equation all that dramatically for employees,” Burris says.
Renbarger agrees that corporations need to set the proper tone.
“If the culture is one of openness and transparency, that values integrity and encourages people to speak up, then I think there will be more reporting,” she says. “On the other hand, if the culture is authoritarian, greed-obsessed, and lacking in values, then there will be a lot less reporting because people are either afraid or don't care — they just want to keep their heads down, get their paycheck, and go home.”
Burris’ research has shown that to get employees talking, managers should be physically present, open and nice about receiving employee feedback, and willing to take action when appropriate. They also should let employees know how their feedback is being used — or not used — and why. Most importantly, managers need to visit employees on their turf and request input, rather than waiting for employees to come to them.
In other words, touting your open-door policy doesn’t mean much on its own, Burris says. “Unless you actually do something with [employee feedback], why would I want to waste my time going out of my way and sticking my neck out to tell you how things really are if nothing is going to change?”
For companies that want their employees to speak up, hiring good management isn’t enough, though. Employers need to take a holistic approach to the corporate culture, since the company as a whole has a greater influence than the malleable personalities of individual managers.
“If the culture’s terrible, they’re going to adapt to that terrible culture,” Burris says.