Corporate Whistleblowing Is On the Rise: What Does It Mean for Your Organization?

According to a 2011 survey conducted jointly by the Society of Corporate Compliance and Ethics (SCCE) and the Health Care Compliance Association (HCCA), 99 percent of publicly traded companies now offer a hotline to employees and stakeholders as a means of reporting incidents of misconduct.

However, the pervasiveness of hotlines and a greater focus placed on whistleblowing in general has raised some important questions: Has the number of incidents that are actually reported increased accordingly, and if so, what has been the impact on organizations?

The SCCE and HCCA decided to find out. An April 2014 survey conducted by the two organizations shed some light on the relationship between the availability of hotlines and incident reporting. The survey consisted of 677 respondents identified as compliance and ethics professionals working for publicly traded companies, as well as organizations with other types of ownership structures in place.

Publicly traded companies have seen an increase in call volume

According to the survey, just more than half of the 677 respondents indicated that the number of calls to their hotline has stayed about the same over the past two years, and 37 percent experienced a slight or moderate increase. However, 56 percent of the respondents that identified their organization as a publicly traded company reported an increase in call activity during this time, with 17 percent indicating a significant increase.

Impact on the volume of actual incidents reported

The survey tells us that hotline call volumes in publicly traded companies have increased over the past two years, but what about the actual number of reported incidents? According to the results, 58 percent of all survey respondents said that the volume of incidents reported within their organization via all reporting methods, including hotline calls and direct reporting to supervisors, has increased, and 14 percent have experienced a significant increase. Thirty-five percent of respondents said that the number of reported incidents remained unchanged.

Once again, public traded companies were ahead of the curve, with 66 percent reporting an increase in incident reports. Only 28 percent of these companies stated that the report volume stayed the same.

What about the number of anonymous reports?

While the majority of respondents stated that the number of reported incidents within their organization is on the rise, 70 percent indicated that the number of incidents that were reported anonymously remained relatively unchanged. Again, the results were somewhat different in publicly traded companies, as only 59 percent reported that there was no change in their anonymous report volume. Twenty-three percent of publicly traded companies reported an increase, compared to 18 percent overall.

Reliability of anonymous claims

Another key survey finding is that there appears to be little difference between the validity of reports made anonymously vs. those made by parties who reveal their identity. According to the survey, 39 percent of respondents said that they were able to substantiate anonymous and non-anonymous reports at the same rate, while 35 percent stated they were able to substantiate anonymous reports at a lower rate than non-anonymous reports. Interestingly, various industry benchmarks indicate that 60 percent of hotline reports are now made anonymously.

Examining the relationship between whistleblowing and litigation

Many companies feared that by facilitating whistleblowing, hotlines and other reporting mechanisms would ultimately lead to a dramatic increase in the number of qui tam lawsuits and claims of wrongdoing made against organizations. According to the survey results, this has not been the case at all. In fact, only 6 percent of the respondents indicated that the number of whistleblower claims made against their company has increased in the past two years. Additionally, 59 percent of publicly traded companies said that their claim volume did not change.

So what does it all mean?

To summarize, employees and stakeholders are now more likely to report incidents of misconduct via hotlines and other internal reporting mechanisms than they were in the past, especially in publicly traded companies. It also appears that more individuals are electing to report incidents internally instead of going outside the organization to seek a remedy.

It’s important to note that, while an increase in internal reporting can ultimately lower a company’s risk of litigation, it does place a greater emphasis on ensuring that effective reporting and investigative procedures are implemented within the organization. Incidents that are pushed aside or mishandled can result in the claimant seeking outside assistance in an effort to resolve the matter.

To download the full 2014 SCCE/HCCA survey click here.

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