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Why Companies Must Actively Encourage Whistleblowers

Wells Fargo. Bio-Rad. Volkswagen. Just three examples of corporations that, to their peril, either ignored or actively suppressed employee whistleblowers. They join countless other companies, large and small, that found out the hard way that a head-in-the-sand approach toward whistleblowers is not just unethical, but also poses grave threats to their bottom lines and public reputations.

Whether it is an enforcement probe, civil litigation, bad PR, or all three, failing to heed or retaliation against a whistleblower can be an extremely costly mistake. To rephrase the Watergate adage, it's not the infraction but the lack of an appropriate response that ultimately leads to the damage.

Whistleblowers in the News

Among the numerous stories reported in the press, Well Fargo, Bio-Rad, and Volkswagen show that whistleblowers hold a variety of jobs across a span of industries:

  • At Wells Fargo, bank employees reported suspicions regarding the creation of fake customer accounts to managers and via the internal ethics hotline, either to no avail or at risk for later retaliation.
  • The former general counsel at Bio-Rad was terminated after raising concerns about possible Foreign Corrupt Practices Act (FCPA) violations, and later won an $8 million verdict from the company.
  • A Volkswagen information manager claimed he was fired for asserting that co-workers illegally deleted electronic data shortly after the U.S. government accused the carmaker of cheating on emissions tests, a scandal that resulted in a $2.8 billion criminal fine against the company.

Aside from the fact that companies should act ethically and responsibly as a matter of course, there is an obvious business case for listening to whistleblowers.

Whistleblowers are Valuable Company Employees

Out of necessity, officers, directors, and C-suite executives focus on the business as a whole, scrutinizing data, analyzing larger trends, and strategizing for the future. From that 30,000-foot vantage point, however, they may not see the minutiae and frontline issues. While examining a balance sheet, they may not be aware of regulatory violations taking place in the day-to-day operations. The boardroom can be woefully out of touch - or wilfully ignorant - of what is happening on the shop floor or in office cubicles. For that reason, whistleblowers can be some of the most valuable workers a company will ever employ.

Turning a blind eye can be far more harmful than hearing employees out and, if warranted, following up appropriately on their concerns. More troubling are the instances where employers retaliate against those brave enough to speak up. Whistleblowers risk harassment, intimidation, and termination, all for doing what they believe is in the best interest of both their company and the public. Such retribution creates a chilling effect, discouraging others from coming forward and impacting company morale overall.

It makes little sense, therefore, for companies to treat whistleblowers the way many, if not most, seem to do. Their knee-jerk response to ignore or suppress concerns serves no one, least of all the company. Instead, managers and executives should repress that initial, and all too human, instinct and openly embrace whistleblowers.

Creating a Corporate Culture that Encourages Whistleblowers

It is not easy for employees to come forward about potential wrongdoing. When they do come forward companies should reward their bravery by showing the same level of courage and loyalty. This is not a time to close ranks and deny, deny, deny. Such a response only creates problems in the long run, and ignoring a concern may cause it to fester and worsen.

Many employers will point to their whistleblower policies as proof they take these issues seriously. However, it's the practice - not the written policy alone - that demonstrates a company's commitment to supporting whistleblowers. The most supportive whistleblower policy is useless if employees have seen colleagues face retaliation for speaking up. Managers and executives should embody both the spirit and the letter of corporate whistleblower policies. This means ensuring employees know the ethical standards and laws that govern their business, and also feel safe pointing out any lapses.

Crucially, every employee who comes forward should be respected and taken seriously. Even if some complaints lack merit, each one should be given the same initial consideration. Consistency is the only way to truly demonstrate that a company is committed to creating a corporate culture that not only tolerates but also openly embraces whistleblowers. The cost of seriously addressing such disclosures is far less significant than the long-term damage of a Wells Fargo or Volkswagen-like compliance issue.

Finally, there is a role and responsibility here, too, for employees to push companies to change. If a whistleblower's complaint falls on deaf ears, or they face retaliation because of their disclosures, there are legal options available that can be discussed with a seasoned employment litigator. As Bio-Rad demonstrates, sometimes litigation is the only language an intractable company will understand.

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