This article originally appeared in our Top 10 Ethics & Compliance Predictions & Recommendations for 2018
Seven years after the launch of the U.S. Securities and Exchange Commission’s (SEC) whistleblower program, the voice of the whistleblower is starting to sound very different. It’s a little stronger, a little bolder, and a little louder.
A review of the SEC whistleblower program’s 2017 Annual Report to Congress gives us a quantifiable look at the monetary force behind this voice. Since the SEC issued its first whistleblower award in 2012, it has proceeded to award approximately $160 million to individuals who have come forth with a report that led to a successful enforcement action. Fiscal year 2017 was a particularly active year with the SEC doling out three of its 10 largest awards of all time. And awarding a total of $50 million (almost a third of all award dollars to date) to 12 individuals.
There is definitely something happening here. More reporters are coming forth with substantiated reports, and the awards for those reports are increasing in number and size.
Going deeper into the annual report, we get a particularly interesting glimpse at the future with a look at the Office of the Whistleblower’s Investor Protection Fund. This is the fund that ensures whistleblower award payments do not subtract from the money to be rightfully returned to investors. Therefore, this is also the fund from which the office will pay out future whistleblower awardees. After the balancing of the 2017 budget, this fund currently has over $320 million dollars in it. That is more than double what the SEC has paid out in all the years it has been in operation. So the SEC is not only poised to maintain its steady growth in annual payouts, but ready to ramp it up as well.
The volume and size of awards are not the only thing on the up. Tips, the submitted reports of whistleblowers, have increased even more drastically. In 2011, the first full year of data from the program, the SEC received 334 whistleblower tips. A modest start. In fiscal year 2017, the program received 4,484 tips.
The type of money the SEC is sitting on is not only incentivizing reluctant whistleblowers, but it is also fueling investment from an ever-expanding cadre of constituents. This is especially true for venture capitalists who are backing whistleblowers to fuel high-stake cases for a portion of the payout. This type of support makes whistleblowers louder than ever, and more capable than ever to survive, and prevail in lengthy court cases.
Continue Reading: Turning Passive Detection into Active Incident Management
Silicon Valley Might Be Breaking Its Silence
The majority of whistleblower cases that financially impact corporations have been mostly squared on the finance and healthcare industries; however, there are signs that tech may soon be getting its fair share of litigation and enforcement.
while only a minority of tech startups fall into the publicly traded realm, many fall under the SEC rules and regulations because of the nature of their funding and structure
One of the most prominent whistleblower plaintiff attorneys, Jordan Thomas, has recently put Silicon Valley on notice. This is because, while only a minority of tech startups fall into the publicly traded realm, many fall under the SEC rules and regulations because of the nature of their funding and structure. As Thomas states, “The SEC has specifically signaled that it is closely scrutinizing the way in which mutual funds calculate valuations of their holding in these companies.”
Regulatory scrutiny is increasing, and the voice of the whistleblower in the Valley is growing louder as well – mostly by a strength in numbers. The most notable indication of this shift in 2017 was former Uber employee Susan Fowler’s exposé, “Reflecting on One Very, Very Strange Year at Uber,” which details a series of compounding instances of sexual harassment she experienced while at the ride-sharing giant. This case, as well as the numerous others coming out of Hollywood, is cultivating an environment of motivation and safety that may effectively shift Silicon Valley’s culture of silence into a culture of silent-no-more.
Key Steps for Companies to Take
External whistleblower reports can thoroughly shake a company, its reputation externally, and its culture internally. Aside from eliminating wrongdoing, there is no benefit to a company by having its dirty laundry aired, litigated and charged on the mainstage. Companies should do their best to ensure they hear and resolve whistleblowers’ reports internally before they are motivated to go outside. Here are a few best practices to not just hear whistleblowers, but to actually show you’re listening.
Take a Very Hard Look at Your Internal Complaint Procedure
Your company needs to have a robust whistleblower hotline and incident management system. This ensures employees have multiple channels for reporting. These avenues must also be transparent, and, well, real. As a compliance practitioner responsible for protecting your organization, you should be testing these channels regularly to ensure reports are being properly received, processed, escalated and ultimately resolved efficiently and effectively.
Employ Clearly Thought out Investigative Protocols
Every company should spend time thinking through in advance how it will investigate cases of variant natures and severities. This should include a plan for dealing with the individual who comes forward during the process to ensure they do not feel shunned, ostracized or retaliated against in any way, shape or form.
Train Frontline Managers
Compliance training may be the most important thing companies can do. There needs to be a renewed commitment to training, most significantly for frontline managers. Managers need to understand what a complaint and protected activity look like. And they need to know how to respond to internal reporters. There is no room for responses like, “keep your head down, and I’m sure it will get better.” Finally, managers need to know what they are supposed to do once they get a report, how to escalate it, and what their role is in the investigation.
Whistleblowers, and the internal corporate programs managing them, have always been an integral part of not just improving corporate transparency, but also improving a company’s performance and bottom line. Today, the voice of the whistleblower is getting stronger and louder and companies need to double down on their incident management processes and efforts to develop a healthy speak-up culture that encourages employees to report internally first. This will ensure companies have a chance to resolve issues before they fester and result in significant reputational or financial damage to their brands.
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