Whistleblowing is the act of reporting any illegal or unethical activities that occur in a workplace. The individual who reveals this information often chooses to be anonymous to protect themselves from retaliation. The metaphorical “whistle” can be blown on issues such as:
- Illegal activities
- Fraud or law-breaking acts
- Health and safety risks
- Cover-ups of wrongdoings
- Sexual abuse or exploitation
- Corruption
- Corporate espionage
- Damage to the environment
What many organizations don’t realize, however, is that whistleblowing can actually safeguard a company from crippling financial, reputational, and legal losses.
Why Is It Critical for Companies to Address Whistleblowing?
There are significant benefits of whistleblowing for any organization. In most cases, whistleblowing can be integral to an organization’s success. It can:
- Reduces losses. Each time an unethical act is reported via a whistleblowing system, the organization gets the opportunity to tackle the situation quickly and prevent it from happening again. The result? The company averts painful financial, legal, and reputational losses.
- Helps act against fraud. Encouraging employees to “speak up” can help organizations uncover and mitigate fraudulent activities, unethical behavior, and corruption. The mere presence of a whistleblowing hotline can be enough to keep illegal activity at bay.
- Issues get addressed before they escalate. Catching ethical hiccups early on is another benefit of having a whistleblowing system. Companies that resolve issues at early stages end up preventing serious harm or damage down the line.
- Creates a “speak up” culture. When an employee’s whistleblowing activities remain anonymous, they feel protected from retaliation. This naturally encourages everyone to report wrongdoings.
- Reveals problems that the company might otherwise have never known through compliance audits.
What the Walls Fargo Example Teaches Us
A great example of bad whistleblowing handling comes from the Wells Fargo scandal. The banking giant had ignored a whistleblower’s report that talked about how the bank created fake accounts without the consent of the customers to meet unrealistic sales targets.
This caused a significant blow to the company’s reputation among investors and customers. The scandal caused its stock price to plummet significantly. Wells Fargo was also fined a whopping $185 million by the Consumer Financial Protection Bureau (CFPB) and Office Comptroller of the Currency (OCC).
The company’s fake accounts scandal even triggered far-reaching implications for the financial industry as a whole.
What Would Happen If the Whistleblower Situation Was Handled Well?
Instead of dismissing whistleblowers, organizations must invest in the reports they receive from them. What the Wells Fargo scandal proves is that ignoring a whistleblower report is all it takes for a 164-year-old company to crumble overnight. Regardless of how “random” or “flawed” a whistleblower may seem, they may, in fact, be the only solid wall standing between an organization and its loss of reputation.
Know Your Whistleblower’s Rights
Whistleblowers are protected against retaliation by law if their tip ever proves to be true. Anti-retaliation laws help:
- Prohibit an organization or its management to take adverse action against the whistleblower
- Prohibit the organization from taking legal action against the reporter to recover losses that may emerge during the investigation process
- Protect the whistleblower from threats of physical violence aimed either at them or their family
What Laws Surround Whistleblowing?
The U.S. Department of Labor carries out its mission through several agencies. Some of these agencies enforce whistleblower and anti-retaliation laws to protect the rights and safety of a whistleblower.
- Occupational Safety and Health Administration (OSHA). OSHA sets and enforces certain standards to ensure safe and healthy working conditions for workers.
- Office of Federal Contract Compliance Programs (OFCCP). The OFCCP “holds those who do business with the federal government responsible for complying with the legal requirement to affirmative action and not discriminate on the basis of race, color, sex, sexual orientation, gender identity, religion, national origin, disability, or status as a protected veteran.”
- Wage and Hour Division (WHD). The WHD mission enforces several laws to ensure organizations comply with the nation’s labor standards.
Reward Laws for Whistleblowers
These laws provide financial rewards to whistleblowers if they assist with the prosecution of frauds of different types. Three of the most common reward laws surrounding whistleblowing include:
Different Types of Whistleblowing
A whistleblower can uncover an illegal or fraudulent act in a formal or informal manner.
Formal
Formal whistleblowing is when a report is transmitted via a proper company channel (for instance, a compliance hotline, reporting to HR, or reaching out to the state Attorney General). Formal whistleblowing can either be anonymous or identified.
- Formal and Anonymous. This could either be internal or external. Internal, formal, and anonymous whistleblowing can be done via the company’s anonymous reporting system, such as an anonymous hotline. External, formal, and anonymous whistleblowing can involve reporting corporate misconduct to a federal agency.
- Formal and Identified. A formal and identified report can either be communicated internally or externally. When communicating internally, formal and anonymous whistleblowing can involve reporting an issue directly to HR. When communicating externally, formal and anonymous whistleblowing can involve reporting concerns with a government agency or the press.
Informal
Informal whistleblowing doesn’t journey through organized or official channels. It can either be anonymous or identified.
- Informal and anonymous. This can be done either internally or externally. Internal, informal, and anonymous whistleblowing could involve sharing an unsigned note with the HR department. External, informal, and anonymous whistleblowing can involve a tip-off to an anonymous online posting or a journalist
- Informal and identified. Internal, informal, and identified whistleblowing can simply involve discussing your issues with a coworker. External, informal, and identified whistleblowing could involve posting the details of wrongdoing on your social media pages.
How to Create a Solid Whistleblowing Culture?
Creating a solid culture of whistleblowing is not a one-day task. It requires constant analysis and remedial actions. Here’s a quick roadmap to encourage your employees to speak up:
- Make the process of whistleblowing safe and easy
- Help your employees understand their identity will remain confidential and they will not be retaliated against
- Reward those who blow the whistle
- Constantly follow up with whistleblowers
- Analyze the volume of retaliation and speak-up rates across your organization
- Identify, investigate, and resolve issues until the workplace gets rid of unethical behaviors and illegal activities
When done internally, whistleblowing can be a gift to your organization. It can help you detect issues that would otherwise never surface and take quick action before minor issues translate into full-blown disasters. If you think it’s time to glean the many benefits of a solid whistleblowing system, reach out to Ethico today!
