Trust and transparency take center stage as new law rewards employees for whistleblowing

Posted on November 1, 2010 7:29 pm by | Ethics | Internal | Legal | Transparency | Trust

imageFor some time now, I’ve been advancing the idea that hiring a warm body to fill a vacancy is no longer a viable staffing strategy. Organizations need to hire people they feel they can trust, since trust is the foundation of employee engagement. When arguing against blocking employee access to social media, I point out that it sends the same message to everyone in the organization: “We don’t trust any of you as far as we can throw you.” Why would any employee want to give discretionary effort to a company that has such little respect for its staff?

Still, I’m told repeatedly that hiring trustworthy employees is simply unrealistic.

Establishing that foundation of trust just got exponentially more important and the consequences of dismissing trust considerably more grave, at least for American organizations.

Here’s a scenario for you:

Somebody in your organization is skimming money that a customer is paying on a contract. Another employee becomes aware of the theft and reports it. Do you…

a) Brusquely acknowledge the information and take action?
b) Reward and/or recognize the employee who reported the violation and take action?
c) Fire the employee?

Too many organizations dismiss internal whistleblowers, like these:

  • A Lockheed employee, tired of trying to get someone to pay attention to problems he’d identified on a Coast Guard account, ultimately resorted to YouTube in order to get somebody to listen.

  • Long before BP experienced the Gulf of Mexico disaster, the company dealt with corrision and leaks in the Trans-Alaska Pipeline and a demoralized U.S. employee base who would rather go to the media than their own company when they identified internal problems. The company set up an ombudsman’s office—staffed by a retired federal judge—to encourage employees to share their discoveries internally. When that didn’t work, the incoming president of BP’s U.S. operations started an intranet blog to try to establish a dialogue with employees in order to build trust.

  • The multiple-choice scenario above is based on the case of Cheryl Eckard, who reported to her employer, Glaxo SmithKline, violations at a Puerto Rico-based plant and who was eventually fired because, when she was ignored, she kept on reporting the violations. She ultimately filed a suit, reported the violations to the government, and will be paid $96 million for having done so.

Among other things, a new law—the Dodd-Frank financial reform law—makes it incredibly enticing for employees to bypass internal processes and go straight to the government. This goes beyond the provisions of the False Claims Act that led to a $750 million settment between the Justice Department and GSK (and the record-busting payment to Eckard), providing financial incentives for employees to blow the whistle on their employers over allegations of securities and accounting fraud and bribery.

According to a Wall Street Journal report (subscription required), “the ‘bounty’ provision completely contradicts the internal fraud-detection efforts put in place or beefed up under the Sarbanes-Oxley law that passed after a wave of accounting scandals.” The Journal quotes Allstate’s chief ethics and complilance officer, Richard Crist, saying “It underminds a lot of work that a lot of us have done.”

(Note, one of the co-authors of this article, Ashby Jones, also posted an item to the WSJ law blog that covers much of the same information; no subscription is required.)

The Journal article is must reading for staff working on communications, HR, and ethics. But there are larger issues involved that go directly to organizational culture, transparency, and trust. It’s simple, really. In an organization where employees get fired for outing illegal or unethical behavior, employees will now have one hell of an motivation—between 10% and 30% of any penalty that exceeds $1 million—to go to the government (or to any of the growing number of lawfirms that will be soliciting whistleblowers as clients).

But in companies where strong bonds of trust have been nurtured, employees are genuinely engaged, and the culture supports the exposure of troubling practices, employees may still opt to go through internal processes to seek resolution to the problems. The Journal piece points to a Best Buy case in which a whistleblower used internal channels to reveal a scheme that defrauded the company of more than $40 million. While the whistleblower didn’t receive any compensation, he was celebrated in the company, strengthening a culture of transparency, according to Chief Ethics Officer Kathleen Edmond.

If you think that’s not a big deal, consider research (like this study, for example) that lists recognition at the top of what most employees want from their jobs.

Think about the companies that get attention for doing things right in the social media space. Think, for instance, about The culture is so strong that I suspect most employees wouldn’t even think about going to the feds first. But make no mistake: Millions of dollars will be enough for some employees to shrug off the trust and engagement the company has built and report transgressions to external regulators.

So the new law, with its broader set of improprieties eligible for reward if exposed, will present a real challenge to organizations that are genuinely interested in cleaning up their own houses. Those companies that don’t already have cultures of trust and transparency will have a harder time building one, but that shouldn’t stop them from trying. Those companies that embrace the reported GSK approach—fire those who blow the whistle—will see whatever small amounts of trust they have earned erode as employees begin sniffing around for the big payoff—particularly since they know the company is more interested in sweeping problems under the rug than in fixing them.

It would be far too easy to exhort companies simply to behave well, leaving nothing on which a whistle can be blown. Unscrupulous, greedy, and desperate people may, under the radar, hold positions in your organization right now. In those jobs, they could be engaging in scams that are equally damaging to the company and its customer or clients. These people can find their ways into companies with the strongest of cultures. Knowing that the government is, essentially, bribing employees to report these incidents externally, you should still redouble your efforts to build the kind of culture where most employees would think first of reporting internally because they know they’ll be honored and celebrated for allowing the company to fix its own problems.

It’s going to get ugly one way or the other. There are degrees of ugliness, though, and you can chalk up every internal report as a victory. There are bound to be more of these victories in companies that embrace trust and transparency as elemental values.



  • 1.Like I've been saying for years, Shel, the four foundational ethos of this new communication landscape are the '3Ts and an A': Truth, Trust, Transparency and Accountability.

    If organisations don't tell the truth, 'Bang!' goes employee Trust.
    If organisations aren't transparent in their dealings with staff, suppliers and the public, 'Bang!' goes Trust.
    If organisations don't hold themselves accountable for their words and actions, then 'Bang!' goes Trust.

    It seems that someone in Govt is finally making them listen.

    Lee Hopkins | November 2010

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