Which employees want to blow that whistle?
HAWAII has seen its share of legal disputes pitting whistleblowers against their employers. These lawsuits result from the whistleblowers' claim of employer retaliation for shedding light on potential fraud or violations of the law. Organizations suffer financially in the form of attorney fees, settlement payments or court-ordered fines. These often publicized events may be an embarrassment to the organization. So, why should organizations encourage employees to report fraudulent activities?
An effective whistleblower program prevents business failures, eliminates waste and reduces related lawsuits. The collapse of large public companies in 2001 and 2002 are examples of what may happen if organizations do not have a proper program in place. Reports published by the Hawaii State Auditor provide numerous examples of mismanaged assets and questionable management practices. Many employees of these organizations were in a position to know something was not right. However, a proper avenue allowing employees to report a claim was not in place or senior management did not effectively respond to the allegations.
Implementing a proper whistleblower program is not an easy task. There is no soup-to-nuts formula for setting up a whistleblower program. Programs will vary depending on the industry and size of the organization. However, including the following components in a program will increase the probability of success.
» Organizations should nurture open communications. Not only should senior management adopt an open-door policy, but the entire company culture should support it. This type of environment promotes continuous improvement and proactive approach versus a hear-no-evil approach.
» The whistleblower program is guaranteed to fail if it is not in use. Get the word out to employees that there is a whistleblower program. Publicize the program through the company's intranet, newsletter or e-mail.
» Provide an avenue for employees to confidentially and anonymously file a claim. Some organizations make use of an employee hot line. Other companies provide Web sites to start the claims process.
Whatever avenue is selected, ensure that filing a claim is not a frustrating step. A busy hot line or unanswered e-mails may derail any program.
Create a screening committee to review claims for merit and relevance. Frivolous claims may be common. Disgruntled employees may vent their frustrations through the program. Many claims may not be indicative of fraud or mismanagement. Claims that have merit and are relevant may be passed on to a governing body for further investigation.
The screening committee should be separate from senior management. For example, this committee may be responsible to the audit committee. An audit committee member, legal counsel, an internal auditor, a human resource employee and an outsourced service provider are examples of individuals who may be appointed to the screening committee.
Release information on the progress of the claim. Whistleblowers want to know their claims are being handled in an expeditious manner and that the organization is working to resolve the issue. For highly sensitive claims, it is imperative to protect the privacy of all individuals impacted by the claim and the organization itself. Consider such cases in advance and develop policies to address these scenarios.
The previously discussed components are general issues to be considered when implementing a successful whistleblower program. There are more complexities to address. Implementing such a program is challenging, requiring the assistance of a range of experts. However, a successful whistleblower program protects reputations and prevents harm to the bottom line.
John Russell is Honolulu manager of consulting services for Grant Thornton LLP. He can be reached at firstname.lastname@example.org