Companies Should Consider the Potential Importance of a Whistle-Blower Policy

Whistleblowing is the act of exposing some act of misconduct within an organization. A recent survey of multinational companies found that many companies do not do enough to encourage whistle-blowers who could help them uncover bad internal behavior. Almost half of the employees surveyed stated that their companies did not have, or did not publicize, a whistle-blower policy. For numerous reasons, companies of all sizes should consider putting in place a basic policy and process for whistle-blowing.

A good manager logically would prefer to deal with problems internally, as opposed to in the public eye. Whistle-blowers can serve a valuable internal function, in that wrongdoing can be remedied before the public and outside investigators learn of it. However, a large percentage of employees fear repercussions by their employer, even in light of protections that do exist under the law for whistle-blowers. As such, employees may seek to find an external vehicle to whistle-blow, particularly if their organization does not provide an internal vehicle in which its employees have confidence.

Once external whistle-blowing occurs, and the employee's allegations become public, companies may potentially suffer reputational damage, in addition to incurring penalties. Further, because external whistle-blowing is often done anonymously, companies may lose the ability to effectively investigate and correct the alleged wrongdoing.

Companies should consider creating and communicating codes of ethics and anti-retaliation policies. Further, channels should be provided for the reporting of wrongdoing. For example, some companies have created hotlines. At the least, a company should inform its employees of the appropriate steps to take in communicating their concerns internally, and strive to create a culture where it is safe to raise concerns at every level.

In the event that wrongdoing is discovered within a company, a strong whistle-blowing policy may also support that company's argument for a reduction of any potential penalties, because the company made a good faith effort to implement adequate procedures to guard against wrong doing.

If you have questions or would like to speak to a member of the Corporate & Business or Employment Law Teams, please call Attorney Sally McDonald at 401.824.5100 or email smcdonald@pldolaw.com.

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