Financial Regulatory Forum

Retaliation rate against U.S. company whistleblowers climbs, senior staff affected, survey finds

By Guest Contributor
September 6, 2012

By Julie DiMauro

NEW YORK, Sept. 6 (Thomson Reuters Accelus) - Retaliation against workplace whistleblowers is rising sharply, expanding into previously safe categories of employees such as senior-level managers and even in workplaces with notably strong ethical cultures, a study found.

The trend comes as new regulations require more formal reporting channels for internal whistleblowing and more managers use them, study sponsors said. They recommended that companies more closely monitor what happens to whistleblowers after they report.

The findings were released this week by Ethics Resource Center (ERC), which bills itself as a non-profit, non-partisan research group. They are contained in a supplemental report to its 2011 National Business Ethics Survey (NBES) which examined nearly 5,000 employees of private-sector companies. The survey found that 45 percent of employees witnessed misconduct at work — a new low since the bi-annual survey began in 1994, and a record 65 percent of those witnesses reported the misconduct.

However, more than one in five (22 percent) of employees who reported workplace misconduct in 2011 said they also experienced some form of retaliation, compared to 12 percent in 2007 and 15 percent in 2009, ERC said. Retaliation was defined as physical harm, online harassment, harassment at work or at home, demotion, job shift changes or cuts to hours or pay.

In the last five years, there has been an 83 percent increase in the rate of reported retaliation, but underlying whistleblowing has only increased by 12 percent. The ERC cautioned that concerns over increased retaliation could reduce reporting rates in the future.

The most dramatic increase noted in the report involved attacks against the whistleblower’s property, a form of retribution reported by 31 percent of retaliation victims in 2011. Two years ago, this number was 4 percent.

The whistleblowers who eport misconduct to managers higher than their immediate supervisor — or to a hotline — experience the most retaliation. Twenty-seven percent who first report to higher management, and 40 percent of those reporting to a hotline say they experienced retaliation; whereas 17 percent who felt comfortable enough to report to their immediate supervisor make the same claim of retaliation.

Retaliation against managers

For the first time in the 8-year history of the NBES, a larger share of managers said they experience retaliation than non-management employees — a full 80 percent of senior managers and 81 percent of middle managers.

“Higher-level managers often see more bad acts, and as companies follow the instructions of Sarbanes-Oxley and of Dodd-Frank, mandating that companies establish effective channels for the reporting of misconduct, they are using them too,” said Patricia Harned, president of the ERC.

The ERC noted that its findings tracked only complaints of retaliation, not verified incidents. But the perception of retaliation is important because it can lead to higher employee turnover. The NBES report notes that 23 percent of workers who feel retaliated against plan to leave their company within a year, as opposed to the 11 percent rate among workers who did not feel they had experienced retaliation.

Retaliation rates have gone up across the board in companies, including those with strong ethical cultures as measured by factors such as written ethics standards, training, confidential reporting channels and links to performance evaluations, the ERC said.

“A way to make your ethical culture even stronger is to recognize that retaliation is misconduct as well,” Harned says. “Companies need to follow up with those who report misconduct — and that means well into the future. Taking action to investigate a whistleblower’s report and taking immediate action, where appropriate, is integral. But continued communication with the reporting employee is a best practice that companies should not forget to follow and make sure their supervisors are trained to undertake.”

Companies that encourage reporting and follow up on reports will be most able to manage whistleblowing cases, says Thomas DiLeonardo, chief compliance officer at KPMG in Washington, D.C.

“You need to consider these reports of misconduct as a level-1 investigation, and it must include an evaluation of the whistleblower down the road — their bonuses, promotions, performance reviews, etc., in light of their peers and their work histories. We do this with the reporter’s input and through our own investigating, plus we follow up with any witnesses to the whistleblower’s report — to make sure they are not being retaliated against either.”

This can take work and time. “If your policy keeps disgruntled employees from leaving the company or underperforming — and it can be a model for an industry trying to get its hands around this issue — that makes it all worthwhile,” DiLeonardo says.

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus. <a href=”http://accelus.thomsonreuters.com/solut ions/regulatory-intelligence/compliance- complete/” target=_new”>Compliance Complete</a> provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 230 regulators and exchanges.)

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •