Why Your Company Should Have a Whistleblowing Policy

In Berkshire Hathaway’s 2004 Annual Letter to Shareholders, Warren Buffett pointed out:

“The second reform concerns the ‘whistleblower line,’ an arrangement through which employees can send information to me and the board’s audit committee without fear of reprisal. — Most of the complaints we have received are of ‘the guy next to me has bad breath’ variety, but on occasion, I have learned of important problems at our subsidiaries that I otherwise would have missed. The issues raised are usually not of a type discoverable by audit but relate instead to personnel and business practices. Berkshire would be more valuable today if I had put in a whistleblower line decades ago.”

The word “whistleblower” is far from the negative connotations attached to it. When deployed well within an organization, whistleblowing can bring countless positive outcomes. When someone blows the whistle, they reveal illicit or unethical activities that a business engages with. In the beginning, these actions may seem like minor infractions. But over time, they can translate into detrimental legal, financial, and reputational losses for companies. Let’s understand why it is critical for organizations to have a whistleblowing policy and how to get started with it.

Benefits of a Solid Whistleblower Program 

A strong whistleblowing policy helps detect issues that may otherwise not come to the organization’s notice. From preventing wrongdoings to creating a lasting speak-up culture, here’s why it’s critical for organizations to create a comprehensive whistleblower program:

Keeps Wrongdoings at Bay

Encouraging whistleblowing can prevent wrongdoing in three ways:

• Those responsible for the misconduct can be rightfully penalized. In a corporate workplace, this could involve either letting them go or removing them from their current position. Both scenarios show the company’s proactiveness towards handling misconduct.
• When everyone becomes aware of the misconduct and its repercussions, they naturally take the lesson to not repeat it. This prevents similar incidents from emerging in the future.
• As more wrongdoings get erased, the workplace culture becomes safer and boosts productivity among employees.

Promotes Transparency and Accountability 

When unethical acts and fraud are discussed openly within the workplace, it shows the company’s commitment to transparency and accountability. It is important, however, to build a culture of openness rather than fear.

Unlocks Deeper Insights into Issues

Whistleblowers put forth an insider perspective whenever they report an issue. They provide fresh details and insights into business activities that may otherwise go unnoticed. Whistleblowers can also uncover issues an external or internal audit can’t. This helps organizations mitigate issues in their early stages before they translate into financial and legal losses.

Protects Against Legal and Reputational Risks

Without a whistleblower’s policy, most incidents of fraud and unethical behavior remain hidden from those who can resolve them. Over time, these issues continue to grow in the background and turn into:

• Damaging public scandals
• Legal prosecution
• Heavy fines
• Severe reputational damages

What’s more, unethical activities can deeply wound individuals, companies, industries, governments, and the environment. Through whistleblowing, companies can strengthen their compliance risk management strategies and maintain an ethical workplace.

Protects Whistleblowers 

According to data, retaliation accounts for 56% of workplace discrimination claims.

Harvard Business Review observes that “retaliation is astonishingly common: 68% of sexual harassment allegations and 42% of LGBTQ+ discrimination allegations made to the EEOC also include charges of employer retaliation”

No employee will come forward to report wrongdoings when they feel their career or safety is at risk. By ensuring they remain anonymous, a whistleblowing policy and system not only makes them feel secure but also encourages the entire workplace to do the right thing.

Prevents Fraud

Whistleblowing plays a massive role in erasing unethical behavior, fraud, and corruption. It makes exposing these activities easier and safer than ever. In fact, just the presence of a solid whistleblowing system significantly lowers the risks of fraud.

Creates a Lasting Speak-Up Culture

An organization that encourages its workers to voice their concerns (and supports them through the process) naturally gains more trust. As a result, more employees come forward with their issues. As your speak-up culture grows, your company begins to see a drop in the volume of misconduct. This, in turn, creates a space where employees enjoy better working relationships and stay more productive.

Mitigates Issues Before They Escalate

What happens when an unethical act goes unnoticed? It either turns into a full-blown public scandal or drains a company of its financial resources. A solid whistleblower system brings the immediate attention of an organization to a minor issue. As a result, companies can take preventive steps to prevent the issue from turning into a disaster.

Raises Awareness

Without whistleblowers, companies risk not knowing the volume and type of unethical activities that happen in the workplace or across business decisions. Through whistleblowers, you can access valuable information (regardless of its nature or the degree of severity. This helps raise awareness of unethical issues that must be addressed as soon as possible.

The knowledge that comes from whistleblowers helps companies avoid similar issues in the future. It also helps companies analyze, mend, grow, and flourish. The fastest and most constructive way to manage compliance breaches often comes from whistleblowing channels.

Constructing A Whistleblower Policy

When crafting a whistleblower policy, it is critical to achieve the following:

• Setting the tone at the top and creating a culture where employees are comfortable reporting misconduct internally.
• Analyze your codes of conduct and policies and alter language that may discourage your workers from raising concerns within the company.
• Establish a solid system of anonymous reporting via hotlines.
• Let employees know their identity will remain fully anonymous.
• The investigation must begin promptly after receiving an anonymous report. The findings must be shared with the employee regardless of the results.
• Run periodic evaluations of the policy.
• Train your employees to help them know their rights and help them understand they are protected by both internal and external protection programs.
• Keep whistleblowers shielded from retaliation of any kind.

A Final Word

A solid whistleblowing policy is critical to strengthen your organization’s whistleblowing culture. Anonymous reporting makes it easy for your employees to do the right thing with ease and without fear. It also helps create a lasting speak-up culture and paves the way for a mentally healthy and fully productive workplace.

If you’re looking for a whistleblowing system that ensures 100% anonymity, is effortless to use, facilitates a two-way communication channel, and more, explore Ethico’s whistleblowing solutions and contact us to learn more!