whistleblower

A whistleblower is a person who tells the public or someone in authority about alleged dishonest or
illegal activities (misconduct) occurring in a government department, a public or private
organization, or a company. The alleged misconduct may be classified in many ways; for example, a
violation of a law, rule, regulation and/or a direct threat to public interest, such as fraud,
health/safety violations, and corruption. Whistleblowers may make their allegations internally (for
example, to other people within the accused organization) or externally (to regulators, law
enforcement agencies, to the media or to groups concerned with the issues).

Definition

Most whistleblowers are internal whistleblowers, who report misconduct on a fellow

employee or superior within their company. One of the most interesting questions with
respect to internal whistleblowers is why and under what circumstances people will either act
on the spot to stop illegal and otherwise unacceptable behavior or report it. There is some
reason to believe that people are more likely to take action with respect to unacceptable
behavior, within an organization, if there are complaint systems that offer not just options
dictated by the planning and control organization, but a choice of options for absolute
confidentiality.

External whistleblowers, however, report misconduct on outside persons or entities. In these

cases, depending on the information's severity and nature, whistleblowers may report the
misconduct to lawyers, the media, law enforcement or watchdog agencies, or other local,
state, or federal agencies. In some cases, external whistleblowing is encouraged by offering
monetary reward.

Under most US federal whistleblower statutes, in order to be considered a whistleblower, the

federal employee must have reason to believe his or her employer has violated some law, rule
or regulation; testify or commence a legal proceeding on the legally protected matter; or
refuse to violate the law.

In cases where whistleblowing on a specified topic is protected by statute, US courts have

generally held that such whistleblowers are protected from retaliation. However, a closely
divided US Supreme Court decision, Garcetti v. Ceballos (2006) held that the First
Amendment free speech guarantees for government employees do not protect disclosures
made within the scope of the employees' duties.

Legal protection

Legal protection for whistleblowing varies from country to country and may depend on any
of the country of the original activity, where and how secrets were revealed, and how they
eventually became published or publicized. Over a dozen countries have now adopted
comprehensive whistleblower protection laws which create mechanisms for reporting,
investigate reports, and provide legal protections to the people who informed them. Over 50
countries have adopted more limited protections as part of their anti-corruption, freedom of
information, or employment laws. For purposes of the English Wikipedia, this section
emphasizes the English-speaking world and covers other regimes only insofar as they
represent exceptionally greater or lesser protections.
India

The government of India has been considering adopting a whistleblower protection law for
several years. In 2003, the Law Commission of India recommended the adoption of the
Public Interest Disclosure (Protection of Informers) Act, 2002.[34]. In August 2010, the Public
Interest Disclosure and Protection of Persons Making the Disclosures Bill, 2010 was
introduced into the Parliament of India, Lok Sabha.[35]. The Bill was approved by the cabinet
in June,2011.The Public Interest Disclosure and Protection of Persons Making the
Disclosures Bill, 2010 was renamed as The Whistleblowers' Protection Bill, 2011 by the
Standing Committee on Personnel, Public Grievances, Law and Justice.[36]. The
Whistleblowers' Protection Bill,2011 was passed by the lower house of Indian Parliament,
Lok Sabha on 28 December 2011. [37].The Bill is however currently pending in the upper
house of Parliament, Rajya Sabha for discussion & Further Passage. The Bill was introduced
in Rajya Sabha on 29 March 2012 by V._Narayanasamy, Minister of State for Parliamentary
Affairs.

Whistleblowing reduces fraud and theft

Whistleblowing has helped reduce up to 50% of corporate fraud and theft in the United
States. Australia is lagging behind in implementing independent, anonymous whistleblowing
services, therefore we have not seen the same reduction in these risks.

An Australian/New Zealand 2010 fraud survey found the average fraud / theft per
organisation in Australia rose to $3 million up from $1.5 million in 2008 and the average
number of frauds increased to 813 up from 530 in 2008. Employees behaving badly have
caused severe monetary losses and significant disruption to business.

Whistleblowing detects and minimises the impact of bullying and harassment

Employers have a duty of care to provide a safe working environment for their employees.
The definition of safety extends to emotional and psychological safety. Companies that use
whistleblowing services find they learn of bullying and harassment behaviours earlier and can
act to stamp them out faster before the behaviours become out of control. Naturally this is of
great benefit to the victims but also provides business owners with comfort as it limits their
exposure to legal and reputational risks including potentially hefty OHS fines and now even
significant prison sentences.

The Royal Assent of the Victorian Crimes Amendment (Bullying) Bill 2011 has resulted in
the amendment of section 21A offence of Stalking in the Crimes Act 1958 (Vic). It
now makes bullying a criminal offence in Victoria. The purpose of this legislative change is
to address the issue of serious bullying and deter people from engaging in the use of abusive
or offensive words to or in the presence of the victim, and acting in a way that could
reasonably be expected to cause physical or mental harm to the victim, including self-harm or
arouse apprehension or fear in the victim for his or her own safety or that of another.
Employers must take responsibility to ensure that employees can work in a safe environment
that is free from these types of risks.
Benefits & Harms of Whistle-blowing

Whistle-blowing is the act of informing higher authorities about illegal or unethical practices
observed. In large corporations, employees may report unethical practices to protect both
themselves and the company. Deciding to report fellow workers or corporate officers is never
an easy decision, since whistle-blowing brings both advantages and disadvantages.

1. Whistle-blowing benefits
o Whistle-blowing often ends long-standing wrongdoing that would have
otherwise continued. In the Enron case of October 2001, the chief executives
were shown to have systematically deceived all company stakeholders with
the help of accounting firm Arthur Andersen, which did not provide legitimate
financial reporting. One of the Enron accountants confronted the CEO in a
memo about what he had discovered and the rest became history. Employees
and shareholders lost billions when Enron folded, yet the whistle-blowing
prevented even further harm. Many Enron executives went to prison, and have
been held personally accountable, making restitution for monies stolen.

In the case of medical malpractice suits, the whistle-blower is upholding the

patient's best interests, not the hospital's or doctor's. In the case of clear
workplace violations of health and safety regulations, or breach of
employment laws, workers are protected and their rights upheld. With regard
to research or technical issues, whistle-blowers may cite internal memos and
other documentation to prove doubts existed about a product (such as a cover-
up of certain medication dangers) or that false research results were knowingly
published. Whistle-blowers often highlight safety concerns regarding cars or
other products, thus protecting an unsuspecting public. Whistle-blowing
upholds the law, protects many from the impact of wrongdoing, reveals the
truth and prevents further wrongdoing.

2. Whistle-blowing drawbacks
o Whistle-blowing can bring many negative repercussions. First, it can bring
termination. It is difficult to remain, no matter how justifiable the decision to
reveal illegalities and no matter how much the revelations actually benefit
others. Second, big-time revelations could bring down the company a la
Enron, causing everyone to lose their jobs. Third, the whistle-blower can get
stigmatized as "disloyal" and be discredited in some way. Fourth, sometimes
colleagues may exact some form of revenge or somehow "scapegoat" the
person. Thus, the whistle-blower is somehow blamed for the wrongdoing and
fired without an opportunity for vindication. In small communities, the
whistle-blower and family may be subject to hostile treatment, viewed as
acting out of self-interest, perhaps to gain advancement at others' expense.

Deciding Correctly

o Whether to blow the whistle on colleagues or senior management is a highly

personal decision. However, when the whistle-blower is certain of illegal
activity, or that real harm exists to the public or to fellow workers, that should
tip the scales in favor of whistle-blowing, regardless of the personal cost.
How do I Create Effective Whistleblowing Mechanisms?

A whistle-blower raises alarms on issues of misconduct within an organization. Such

reporting is often received with hostility by affected parties. In the United States, the
Occupational Safety and Health Act administers provisions of 17 statutes that protect whistle-
blowers from violations and discrimination. Creating effective whistle-blowing mechanisms
can help organizations weed out unethical and illegal practices that harm business operations.

Instructions

o 1

Develop a code of ethics for your organization and mentor workers to embrace
the code. Let employees and management sign the code. The code of ethics
should guarantee protection for reports on misconduct. This program
encourages reporting and removes the fear of retaliation. Show commitment to
ethical conduct through memos, newsletters and talks to your personnel.
Specify the disciplinary measures for providing false information.

o 2

Allow employees to voice concerns through telephone hotlines, mail boxes, e-

mail or blogs. Appoint a human resource professional to act as an
ombudsperson for the organization to encourage openness. Encourage an
open-door policy for all complaints, and allow complaints to be filed
anonymously.

o 3

Establish an awards program for genuine acts of whistle-blowing and

acknowledge the action in public. Lead through example.

o 4

Act immediately on the reported complaints and maintain confidentiality of

the source of the information. Have someone outside the organization
investigate misconduct allegations, and set time limits for the process. Follow
up on investigators' reports, and implement changes.

o 5

Conduct an annual survey to gauge employee opinion of the organization's

ethical culture in relation to the mechanism available to report misconduct.
Use feedback surveys to monitor how workers perceive individual
performances within the organization. Welcome suggestions from employees
on ways to improve on the existing whistle-blowing mechanisms.
How to Encourage Whistleblowing

Whistleblowing refers to the act of a person bringing attention to people suspected of

wrongdoing. Typically, the whistleblower is also a part of the organization. The wrongdoing
might be fraud, corruption or a violation of safety. The whistle may be blown internally (such
as to others involved within the organization) or externally (such as to law enforcement
agencies). However, many people have qualms about drawing attention to companies for fear
of losing their jobs, whether due to violating the terms of a contract or angry employers.
However, there are ways to encourage people to do the right thing.

Instructions

o 1

Develop a policy for reporting unethical or illegal practices. Ensure that it

includes a means to report violations, such as a mailbox or a hot line. Identify
a specific person or a specific chain of command in an effort to provide a clear
communication in reporting violations.

o 2

Conduct training for all employees. Training should include teaching all
employees how to deal with situations when wrongdoing occurs within a
company without having to worry about retaliation. This may be similar to the
training regularly used during sexual harassment meetings.

o 3

Request an endorsement from council members, boards, managers, the mayor

or other top officials. Make your commitment to honesty and rightfulness a
public campaign. Encourage ethical behavior and let all employees know they
are held to the highest standards possible, which includes having to disclose
certain activities that might have a negative impact on the public image of the
company.

o 4

Offer a monetary incentive--employees who report valid complaints toward an

unethical act may receive a financial award, thereby lessening a fear of
retaliation.

o 5

Investigate any and all claims of unethical conduct in a prompt manner.

Report all claims to the board.
Whistle blower Procedures

A whistleblower exposes the wrongdoing of an employer or an individual. He can do so

either privately or publicly. Wrongdoings worthy of attention are the result of unethical
practices or illegal activity. Whistleblowers expose undue risks to public safety, fraud,
corruption and other malfeasance.

1. Venues
o Whistleblowers can remain anonymous by reporting wrongdoings internally to
a superior in their company. This prevents retaliation from co-workers.

Alternatively, whistleblowers can use a public forum. An external

whistleblower goes to the media or a law enforcement agency. As soon as a
whistleblower reveals information to anyone outside the office, including an
attorney, the situation becomes external and is resolved as such.

2. Whistleblower Protection
o Federal law protects whistleblowers from retaliation. This is very beneficial,
as whistleblowers reasonably may fear retaliation for exposing a wrongdoer's
conduct. Federal whistleblower protection statutes reduce the risk of reporting
misconduct.

Whistleblower Trial

o Gather evidence for the upcoming trial. In many cases, the whistleblower can
receive a large monetary reward if her information leads to a successful
prosecution. You want to have all of the evidence necessary to prove your
allegations.

Whistle blowing Procedures

A whistleblower is an individual at a business who accuses his organization or a coworker of

violating a law or regulation. A whistleblower can be internal, acting within the company or
external by going to the media, lawyers or the police. By having internal whistleblowing
procedures in place, a company can often keep a legal problem from blowing out of
proportion or getting out to the media.

1. Ethical Hotline
o Some companies have a phone line set up so that employees can call with
ethical concerns. The Marathon Oil Corporation uses an Integrity Helpline that
is available 24 hours a day and 365 days a year for all ethical concerns. Within
one business day, the suspected violation is responded to with either action or
an answer. The call can be made anonymously or a name can be left. The
company does not retaliate against a complaint registered in good faith. Good
faith can be defined as a selfless call that is genuinely made with no other
 factors involved but the matter in question. Other companies like Starbucks
use a third-party ethical hotline to evaluate complaints with an impartial view.

Evaluation

o After a company receives an ethical complaint, it must evaluate the statement

for various factors. It first must decide if the complaint is actually a violation
of law. There are some instances in which the possible violation is actually a
labor relations, management or personnel issue rather than a breach of law.
The complaint must also be evaluated to ensure that it is in good faith and that
it is not impacted by other factors in the organization.

Review

o If the complaint is determined to have validity as a violation of law, it will be

reviewed by the proper branch of the company. For example, if the violation
involves money, the audit and financial areas of the company will meet to
review the complaints with the party who has been implicated in the
whistleblowing. After the complaint is reviewed, the whistleblower may or
may not be informed of the results depending on the company policy.

Retaliation

o Even if a whistleblower has made an effort to remain anonymous, there is a

chance that word will get out about the complaint. This can occasionally lead
to retaliation by the members of a workplace. Retaliation can take the form of
any actions by coworkers or management that violate standard personnel
policies and that cause an adverse environment. Many companies have
policies for retaliation and give these whistleblowers a chance to file a
complaint about the retaliation. The retaliation will be evaluated within a
certain time period (within 120 days or so), and corrective action may occur
against the person who was retaliatory toward you.

Build Organizational Culture to Encourage Ethical Conduct

Where we have worked as ethics officers, allegations identified less than one percent of the
employees as “outliers”—suspected or actual ethics violators. Lynn Brewer, who worked for
Enron and now is an independent ethics consultant, said her experience is that up to 20
percent of the employees in companies she works with may be outliers. Either way, the
alleged violators are a minority. Not that a “minority of wrongdoers” should be ignored, but a
company should invest most of its ethics effort on helping the majority of its employees (our
99 percent or Brewer’s 80 percent) achieve the high ethics they aspire to.
For a company with 125,000 employees at more than 1,200 locations in several nations, the
challenge of getting all of them to think the same way about ethics is akin to getting 125,000
individual rowboats to go in the same direction. For a smaller company with 125 employees
at one location, the challenge may be smaller in quantity but has no reduction in intellectual
complexity. The company must somehow touch every employee and get her or him to
actively row in the right direction. Once everyone is trained, if employees see someone’s
rowboat straying off course, they often are able to get that person back on course—making
ethically wise decisions—without pain or shame.

Professors David Cooperrider and Leslie Sekerka paint two approaches to building
organizational culture. One has a deficit focus: detect errors, analyze root causes, plan
remedies, and implement corrections. The second has an appreciative, positive focus: seek
and draw out human strengths so the organization self-organizes to be even better.

With respect to company ethics, the first approach, deficit focus, is whistleblower territory.
The company is reactive. It responds to whistleblower reports, either external or internal, by
racing to fix worrisome, distracting, and sometimes crippling problems that have already
struck the company, problems caused by “outliers.” The second approach, appreciative focus,
is rowboat territory. The company addresses prevention. It seeks to avoid problems entirely
by helping the 80-99 percent majority achieve the high ethics they aspire to. Instead of
fighting ethical breakdowns, it builds an organizational culture that encourages ethical
conduct.

For ethics programs, the two approaches are not an “either/or” choice. Both are required.
Problems created by the minority must be resolved, but helping the majority prevent
problems deserves much more attention, is ignored too often, and has an important side
effect: Peer influence can pull an outlier minority toward majority norms.

Eliminate the Need for Either Internal or External Whistleblowing

A recent development is that some people who want to blow an external whistle use Internet
blogs that publish their allegations without review by intermediaries such as journalists, law
enforcement officers, elected public officials, or advocacy group staff members who might
influence tone, content, and credibility. Laws may prohibit adverse action against an
employee who whistleblogs. Blog operators, of course, may elect to delete a blog entry. Or a
company may choose to post correct information alongside the whistleblogger’s allegation.

Field experience answering employee calls indicates people blow external whistles when they
hope outsiders will fix the problem but believe the company won’t listen to them. They blow
internal whistles when they hope the company will fix the problem but believe the managers
won’t listen to them. They feel no need to blow any whistle when they believe—trust—a
manager will listen to them and fix the problem. To eliminate the need for any
whistleblowing, an organization must build a culture of trust.

Where trust flourishes, whistleblowing is unnecessary because the culture is so open and
honest that everyone feels safe raising any issue with anyone and is confident the issue will
get prompt, full, and fair consideration.

Interestingly, Vince Nye provided a spectacular demonstration of such trust. Nye, an internal
investigator at Hewlett-Packard, had the ethical sensitivity early on to recognize “pretexting”
for what it was and raise it with HP managers as an ethics issue: “[I]t is very unethical at the
least and probably illegal. If [it] is not totally illegal, then it is leaving HP in a position that
could damage our reputation or worse.” A month later, Nye notified HP managers a second
time that he considered pretexting an ethics issue: “Although in the opinion of our legal staff
the practice of obtaining cell phone call data is legal . . . [it] is still in my mind an
inappropriate investigative tactic and unethical. . . . If one has to hold his nose and then
conduct a task, then [it] is logical to step back and consider if the task or activity is the right
thing to do. In this matter, collecting cell phone call data in my opinion was a nose closer.”
Nye’s words stand as evidence that a viable trust system existed in the part of Hewlett-
Packard he worked for. Nye challenged up not just once, but twice! What could speak more
eloquently for his belief that his organization’s culture, its trust system, made it safe for him
to speak out?

Although Nye felt the culture around him was open and honest enough for him to safely
speak out twice, on the second occasion he argued that decision-makers failed to give full and
fair consideration to his issue. That highlights the reality that creating an organizational
culture fostering ethical conduct is not simple and one-dimensional. Different parts of an
organization develop subcultures, so a company must attend to each subculture and ensure
trust flourishes and the subculture embraces open communication, compliance with the law,
and—beyond compliance—recognizes that sometimes company values expect higher
standards than the law demands. From Nye’s perspective, for example, the decision that
pretexting is legal (compliance) should be overridden by the danger that pretexting could
damage the company’s reputation (values). Others have stated the principle succinctly:
“Some things that are legal, this company chooses not to do.”

Many companies already try to encourage a culture of trust by espousing open door policies
and encouraging employees to take problems first to their managers. But employees may see
those channels as blocked, as offering no hope of action to resolve their concerns. What
blocks the channel may be:

 Attitude. We’ve all heard about managers whose attitude is “my way or the highway,”
“don’t rock the boat,” “I don’t want to hear bad news,” or “just do what you’re told--
you’re not paid to think.”
 Behavior. We’ve all known managers who seem unavailable. They are “always” in
meetings, or traveling, have their door closed, are too busy to listen, or are
uninterested.
 Wrongdoing. Some of us have known managers who actually did something wrong
and want to cover that up.
 Fear. Retaliation by managers can be too wily and subtle to prove in court but
nonetheless real and painful.

Insightful leadership and vision are required to overcome those obstacles—to change those
attitudes and behaviors, to prevent wrongdoing, and to eliminate fear.

Steps for Creating a Culture That Eliminates Need for Any Whistleblowing

U.S. newspapers today are full of stories demanding that people be taught “ethics” and what
they mean is teach people the rules then catch and punish anyone who violates them. But the
vision that business ethics is a police function is wrong. Don’t design ethics programs to
catch wrongdoers and punish them. That’s a good thing to do, but policing is someone else’s
role.

Establish a Leadership Vision

The leadership vision should see business ethics as a mentoring function Design it to help
people make good ethical decisions in the first place and thereby prevent wrongdoing,
eliminate ethics failures, and eliminate the need to punish anyone. Ethics is a tool leaders use
to build mentoring relationships and a trust system throughout their organization.

Four Ways to Mentor Managers and Employees

Use Training. Have managers teach compliance, company values, and good ethics decision-
making to their direct reports. The best way for managers to learn those things is to teach
them, and the best way for employees to learn is to be taught by their own managers. We’re
talking about an enduring effort, not one-time classes. Discuss ethics in regular staff meetings
throughout the year, year-in and year-out. Such teaching involves managers and employees in
discussion of ethics issues in a safe, training environment, and it opens the door for safe
discussion of real ethics issues in the future in their normal working environment.

After Boeing Corporation experienced several very public ethics scandals, an outside
committee led by Warren B. Rudman studied Boeing’s ethics program. The Rudman report
emphasized that leaders must take responsibility for ethics: “We cannot stress enough how
important it is for senior executives to incorporate into their everyday planning and
communications the unambiguous message that ethics, integrity and compliance are at the
core of Boeing’s corporate culture.” For training, specifically, the Rudman report said the
give and take of group discussions led by their own managers “is most effective, not only in
imparting information, but in ensuring that management at all levels is seen to view these
issues with the utmost seriousness.”

Use Performance Appraisal. Use a performance evaluation and management process that
looks toward helping employees succeed in the future more than toward documenting
weaknesses perceived in the past, that tracks and builds on the ethics training and mentoring
being conducted by the manager, and that is designed to focus managers on coaching
employees to success throughout the year because that builds trust.

Use Feedback Surveys. Provide occasional multi-rater (or 360-degree) feedback, especially
for managers, because people need to know how others generally perceive they live up to the
company’s values.

Use an Open Line. Provide a safe path—an Open Line—anyone can use to get a question or
issue to functional experts and senior managers. We refer to that safe path as the Open Line
whether the communication arrives by telephone, letter, e-mail, or face-to-face meeting with
the “caller.” The name makes a difference. Research conducted by the Ethical Leadership
Group showed channels named Hotline or Alert Line receive about four calls per year per
1,000 employees. They apparently are seen as 9-1-1 whistleblower emergency lines that don’t
welcome calls unless they report crimes in progress. Lines with friendly names like Open
Line or Help Line apparently are seen as mentoring lines and receive about 23 calls per 1,000
employees each year.
A number of third-party companies offer to supply Open Line service but what they best
support is reaction to incidents, not mentoring the ethical majority. Analyze the data. Studies
consistently indicate about 20 percent of Open Line callers ask a question the company can
answer to prevent an ethics incident. About 20 percent allege fraud, waste, abuse, or other
compliance issues, which the company has a legal duty to detect and investigate. The
remaining 60 percent express workplace concerns which a function—usually human
resources—can address to cure damaged trust. Like any answering service, what third-party
suppliers do is only a first step in the Open Line process: take a message for the company to
act on later. Using them denies a company opportunity to mentor all callers immediately,
eliminates opportunity to help the 20 percent asking questions find answers immediately, and
eliminates opportunity for the company to collect incidental climate-sensing information.

Steps for Creating a Whistleblowing Culture

Create a Policy

A policy about reporting illegal or unethical practices should include

 Formal mechanisms for reporting violations, such as hotlines and mailboxes

 Clear communications about the process of voicing concerns, such as a specific chain of
command, or the identification of a specific person in the organization, such as an
ombudsman or a human resources professional

 Clear communications about bans on retaliation

In addition, a clear connection should exist between an organization's code of ethics

and performance measures. For example, in the performance review process,
employees can be held accountable not only for meeting their goals and objectives but
also for doing so in accordance with the stated values or business standards of the
company.

Get Endorsement From Top Management

Top management, starting with the CEO, should demonstrate a strong commitment to
encouraging whistleblowing. This message must be communicated by line managers
at all levels, who are trained continuously in creating an open-door policy regarding
employee complaints.

Publicize the Organization's Commitment

To create a culture of openness and honesty, it is important that employees hear about
the policy regularly. Top management should make every effort to talk about the
commitment to ethical behavior in memos, newsletters, and speeches to company
 personnel. Publicly acknowledging and rewarding employees who pinpoint ethical
issues is one way to send the message that management is serious about addressing
issues before they become endemic.

Investigate and Follow Up

Managers should be required to investigate all allegations promptly and thoroughly,

and report the origins and the results of the investigation to a higher authority. For
example, at IBM, a long-standing open-door policy requires that any complaint
received must be investigated within a certain number of hours. Inaction is the best
way to create cynicism about the seriousness of an organization's ethics policy.

Assess the Organization's Internal Whistleblowing System

Find out employees' opinions about the organization's culture vis-à-vis its
commitment to ethics and values. For example, Sears conducts an annual employee
survey related to ethics. Some questions are: Do you believe unethical issues are
tolerated here? Do you know how to report an ethical issue?

Conclusion

Given the prevalence of corporate misconduct in the recent past, whistleblowing incidents
have been on the rise. A 2002 article in Business Week called 2002 the "Year of the
Whistleblower" and quoted Stephen Meagher, a former federal prosecutor who represents
whistleblowers, as saying that "the business of whistleblowing is booming." This trend is
likely to be bolstered by the provisions of the Sarbanes-Oxley Act, which for the first time,
accords legal protections to whistleblowers in publicly traded companies. This means
organizations will have to institute rigorous policies to allow employees to bring unethical
and illegal practices to the forefront. Companies will have to train managers and executives
on how to encourage openness, not unlike the sexual harassment training of a decade ago.
Putting processes in place will not be quick, but it is certainly necessary given the increased
public scrutiny of corporate behavior.

How to Implement a Whistle Blower Program

Facing an onslaught of complaints about corporate misbehavior, companies have finally

gotten serious about starting so-called "whistle blowing" programs to address it. Building
credibility is the challenge, which can only be accomplished through consistent enforcement.

Instructions

1. Understand The Relevant Laws

o 1

Understand the relevant laws affecting corporate governance. The best recent
example is the Sarbanes-Oxley Act of 2002--in particular, Section 302, which
requires companies to certify that effective programs exist to root out fraud
 and misconduct. Not doing so can trigger federal indictments within certain
guidelines, according to Sharie A. Brown, a Washington, D.C attorney
specializing in whistle blowing cases.

o 2

Make sure the prospective program can actually be implemented within the
company culture. Lack of funds or resources to make the program effective
may also be grounds for potential indictment, as Brown notes.

o 3

Develop an ethics code that can serve as a road map for corporate behavior.
Save additional space for explanations of more abstract concepts--such as
conflicts of interest--that may hold special relevance. Make sure that the
language distinguishes between questionable and illegal situations.

2. Open Communication Lines

o 4

Open toll-free hotlines to enable the reporting of ethics violations, or consider

specialized whistle blowing software to allow online filing. However, don't
rely on these measures to do the heavy lifting, since Section 404 of Sarbanes-
Oxley requires management to show its internal controls are effective, Brown
states.

o 5

Make ethics materials fun and relevant. Instead of cranking out a dry, jargon-
filled manual, post simple, visual brochures that anyone can understand. A
little creativity goes a long way--such as the "American Idol"-style audition
videos that one company produced to get staff thinking in a humorous way
about ethics, according to an April 2008 entrepreneur.com article.

o 6

Keep employees in the loop. As entrepreneur.com noted, whistle blowing

complaints often take a long time to investigate. This may not always be
apparent to the complainants who file them, so give periodic updates about
what's happening.

3. Evaluate The Program's Effectiveness

o 7

Appoint an internal auditor and a compliance committee to measure your

program's effectiveness. The auditor can double-check how well managers are
promoting your program, and whether employees understand its internal
workings.

o 8
 Track and repoirt key statistics to review your program's progress, including
the number of hotline calls, percentage of anonymous reports, and types of
issues raised, Post these statistics in a visible place, such as your company's
website.

o 9

Make senior management and financial officers accountable by having them

certify that they understand the code, and have observed no violations. As
entrepreneur.com suggests, giving managers a stake in the outcome is the best
way of promoting whistle blowing programs.

Tips & Warnings

 Don't worry if minor complaints make their way through the system, which your
company's legal counsel can resolve quickly. Failure to investigate all complaints can
undermine the best-intentioned program.
 If your company operates in non-English-speaking countries, provide ethics materials
and hotline information in the appropriate languages.
 Go the extra mile at all times to protect confidentiality. If employees feel unable to
speak without retribution, they will become convinced that whistle blowing is not
worth their time.