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By contrast, reports of potential wrongdoing to government agencies rose last year

From: Wall Street Journal By Mengqi Sun

Corporate ethics hotlines received fewer reports overall from employees in 2020 despite a surge in Covid-19-related health and safety reports, data shows.

Third-party managers of the hotlines saw a drop in the total number of reports last year, with 54 million employees lodging more than 1.3 million internal reports, a roughly 7.1% decrease from 2019, according to data from Navex Global Inc.

The overall decline in reports also included decreases in tips about potential fraud and bribery.

The decline came even as reports regarding concerns or potential wrongdoing related to the environment, health and safety increased by 47% as the novel coronavirus pandemic struck, according to data from Navex. The Lake Oswego, Ore.-based company manages hotlines for more than 8,000 companies.

The drop in overall reporting could be attributed in part to layoffs, furloughs and business closures during 2020, according to risk experts.

In other words: fewer employees, fewer reports.

However, remaining employees may also have been more hesitant to report potential wrongdoing, fearing retaliation amid economic uncertainty, the risk experts said.

Carrie Penman, chief risk and compliance officer at Navex, said she noticed reporting drop as employees started working from home last March. Reports picked up a few months later, but didn’t return to pre-pandemic levels.

“When people work from home, you lose that cohesive glue that ties people together,” said Philip Winterburn, chief strategy officer of Denver-based compliance software provider Convercent, which saw overall reporting from 750 corporate clients fall by 20% by the end of 2020—despite a surge in whistleblowing in March and April driven by health and safety concerns.

Distance from the office may also have emboldened some employees to take their concerns directly to government agencies.

The U.S. Securities and Exchange Commission’s whistleblower program, which rewards tipsters with information of possible securities law violations that lead to successful enforcement actions, received about 6,900 tips in fiscal year 2020—the most for any year since the program began in 2011.

“[People] maybe also felt a little more disconnected from their companies and their internal reporting,” Jane Norberg, the SEC whistleblower office chief, said at a compliance industry conference in February. “They’re not seeing their boss every day that they might have talked to, or maybe they didn’t feel like they have the same access to their internal hotline or whomever else they would report to within the company, and then perhaps they started coming to us.”

Offers of financial rewards and protections for whistleblowers may also have encouraged more reporting to government agencies, experts said.

A recent U.S. Supreme Court decision that raised questions about protections for whistleblowers may have given tipsters pause about filing reports with their companies, according to lawyers who represent tipsters.

As employers look to maintain remote work after the pandemic, they will need to rethink how to engage employees with their company compliance culture, mission and values through surveys, training and outreach programs, Mr. Winterburn said.

“This is the area you need to spend more time and money on, because more people are working from home, and not in the office where you can easily get in touch with them,” he said.

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