The number of whistleblower complaints received from regulators on both sides has increased dramatically since the COVID-19 pandemic. The US Securities and Exchange Commission (SEC), reported on November 15, 2021 that it had paid out $564 million in whistleblower awards to 108 individuals.
The exponentially increasing number of financial incentives for whistleblowers is another factor. The SEC has been offering financial incentives to whistleblowers that are increasing in size.
It is crucial that companies do two things well in this environment of increasing whistleblower complaints
- Keep an eye out for whistleblowers to ensure they have an outlet for their complaints.
- Put in place solid corporate governance policies and procedures for handling complaints that arise.
Hotlines for Whistleblowers
Two reasons are crucial for well-designed whistleblower hotlines: They are important because regulators in the US and UK pay attention to them and encourage employees to first report problems internally before reporting to regulators.
The US Department of Justice (DOJ), UK Bribery Act 2010, and EU Whistleblowing Directive all state that regulators expect companies to have strong policies regarding whistleblowers. Without such policies, serious inferences could be drawn during an investigation. Effective whistleblower hotlines are not only a good way to encourage internal reporting, but they can also protect a company’s position with regulators over the long-term.
The term “hotline” can be used to describe a variety of avenues to submit whistleblower complaints. These include email, phone, and text. Sometimes, third-party providers manage the hotline. There is no universal model for whistleblowing hotlines. However, whistleblowing hotlines should be equipped with several key features to encourage good corporate governance. A whistleblowing hotline should include:
- Accessible 24/7, toll-free and well-publicized
- Multilingual support available (as applicable).
- Secure, anonymous and confidential
- Able to quickly escalate urgent matters to the executive levels (to the extent required).
Management strategies and other best practices
To handle whistleblower complaints properly, companies should not only establish and make public a hotline for anonymous whistleblowers, but also to avoid falling-out, be ready to answer regulator questions, and follow other best practices.
Whistleblower claims should be taken seriously
To determine if further action is necessary to correct the misconduct, all allegations must be thoroughly investigated. Do not immediately question the veracity or motive of the whistleblower. Instead, focus on the substance of the complaint and its seriousness.
Summarized from an article by Cooley.
