ETHICS REPORTING SYSTEMS Chapter Eight Copyright © 2012 John Wiley & Sons Visit for the latest in business news stories.

Chapter 8 Learning Objectives Understand why some employees do not report ethical misconduct Describe how to engage employees in discussing ethical misconduct Administer an internal reporting system for ethical issues Create an Ethics and Compliance Officer and ombudsperson position Manage an assist line to receive employee complaints by telephone or Internet Describe the negative outcomes whistle-blowing has on both the whistle-blower and the organization Chapter 8: Collins, Business Ethics

Employee Silence on Ethical Misconduct Exhibit 8.1 highlights how often an observed ethical misconduct that benefited the organization or an employee is unreported Chapter 8: Collins, Business Ethics

Employee Silence on Ethical Misconduct Why don’t employees intervene when Colleagues and managers ethically misbehave? Why don’t employees at least inform the person’s superior? Chapter 8: Collins, Business Ethics

Employee Silence on Ethical Misconduct Insert Exhibit 8.2 Chapter 8: Collins, Business Ethics

Ethically Approachable Managers The best ethics reporting system is a manager who welcomes ethical discussions with employees Employees are more likely to discuss an ethical concern with a manager if these types of discussions occur on a regular basis rather than only during dire circumstances Chapter 8: Collins, Business Ethics

Ethically Approachable Managers Becoming an “approachable” manager is an important managerial skill for helping employees overcome fears about discussing any workplace problem Approachability also means having frequent interactions with subordinates Chapter 8: Collins, Business Ethics

Ethics & Compliance Officer The Federal Sentencing Guidelines provide a judicial incentive for assigning a high-level employee the responsibility of managing ethical performance A growing number of organizations assign this responsibility to an Ethics & Compliance Officer The position enables sensitive information to be shared without being diluted or stymied by the chain of command Chapter 8: Collins, Business Ethics

Ethics & Compliance Officer Insert Tips and Techniques Ethics & Compliance Officer Attributes Chapter 8: Collins, Business Ethics

Ethics & Compliance Officer Insert Exhibit 8.3 Chapter 8: Collins, Business Ethics

Ethics & Compliance Officer Chapter 8: Collins, Business Ethics

Ombudsperson By providing employees with an institutional voice, the ombudsperson serves as a deterrent against managerial abuse of power An ombudsperson is held legally accountable to a professional Code of Ethics Chapter 8: Collins, Business Ethics

Ombudsperson The International Ombudsman Association’s Code of Ethics highlights four ethical principles and corresponding policies 1. Independence: The ombudsperson is independent in structure, function, and appearance to the highest degree possible within the organization 2. Neutrality and impartiality: The ombudsperson remains unaligned and impartial and does not engage in any situation that could create a conflict of interest Chapter 8: Collins, Business Ethics

Ombudsperson 3. Confidentiality: The ombudsperson holds all communication in strict confidence and does not disclose confidential communications unless given permission to do so. The only exception to this privilege of confidentiality is when there is an imminent risk of serious harm 4. Informality: The ombudsperson does not participate in any formal adjudicative or administrative procedure related to concerns brought to his or her attention Chapter 8: Collins, Business Ethics

Chaplains Chaplains are members of a religious clergy trained in providing spiritual advice Corporate Chaplains originally provided care for employees and their families Over time, their list of services expanded to include helping employees manage ethical dilemmas and interactions with other employees Chapter 8: Collins, Business Ethics

Assist Lines Types of Inquiries Many organizations now refer to this communication channel as an assist line rather than an ethics hotline The phrase “ethics hotline” makes it seem as though the employee is snitching “Assist” more accurately describes most of the calls that are received Chapter 8: Collins, Business Ethics

Assist Lines Assist lines are a method of obtaining information about situations that may be unethical or illegal Nearly all Fortune 500 companies provide toll-free assist lines for employees from all over the world to share their concerns Small organizations can contract out to an assist line managed by a third party Chapter 8: Collins, Business Ethics

Assist Lines Effective Assist Lines Assist line success requires honoring confidentiality at all times Assist lines can be designed to uniquely address professional issues or to ensure that assist line contractors adequately address specific concerns Chapter 8: Collins, Business Ethics

Assist Lines How an Assist Line Works EthicsPoint—an employee anonymously contacts EthicsPoint by or telephone and receives a confidential case identification number Employees comfortable with the system can provide their names, but this is not required Chapter 8: Collins, Business Ethics

Assist Lines The response system is scripted to gather as much information as possible from an anonymous employee The information is categorized based on the type of issue and operations area and then routed to the appropriate manager at the employee’s organization The manager who receives the information responds to the EthicsPoint system using the case identification number Chapter 8: Collins, Business Ethics

Whistle-blowing When to Blow the Whistle Begin by consulting with an attorney. Legal advisors recommend that the following four conditions be met before an employee informs an external authority: 1. Serious harm is involved 2. The whistle-blower has already expressed his or her concerns to an immediate superior 3. The whistle-blower has exhausted other communication channels within the organization 4. The whistle-blower has convincing, documented evidence Chapter 8: Collins, Business Ethics

Whistle-blowing The False Claims Act was initially passed in 1863 during the Civil War to prevent defense contractors from fraudulently selling Union Army rifles, ammunition, and horses President Ronald Reagan’s administration strengthened the Act in 1986 An employee who independently sues his or her employer for fraud can now receive between 15 and 30 percent of the total recovery amount plus attorney fees and related costs for successful lawsuits Chapter 8: Collins, Business Ethics

Whistle-blowing Insert Exhibit 8.5 Chapter 8: Collins, Business Ethics

Whistle-blowing Reporting Tax Fraud The IRS created a Whistleblower Office to receive information about possible individual or corporate tax frauds The IRS Whistleblower Office modeled a Whistleblower Reward Program after the False Claims Act, paying whistle-blowers 15 to 30 percent of the unpaid taxes recovered Chapter 8: Collins, Business Ethics

Whistle-blowing Insert Exhibit 8.6 Chapter 8: Collins, Business Ethics

Whistle-blowing Sarbanes-Oxley Act of 2002 (SOX) According to SOX, no publicly traded company or subcontractor of that company can discharge, demote, suspend, threaten, harass, or in any other manner discriminate against a whistle-blower It also establishes criminal penalties for retaliation against whistle-blowers of fines and imprisonment up to 10 years Chapter 8: Collins, Business Ethics

Whistle-blowing Negative Outcomes for Whistle-blowers Researchers report that soon after blowing the whistle, many whistle-blowers experience 1. Negative performance evaluations 2. Undesired job transfers 3. Demotions 4. Criticism or avoidance by coworkers 5. Physical, psychological, and family problems 6. Loss of job or forced retirement 7. Blacklisting impeding employment 8. Protracted legal battles waged at personal expense Chapter 8: Collins, Business Ethics