In-house whistleblower programs

We still hear a lot of talk about the reliability of second-hand information in relation to the Trump whistleblower. In November, a study of data from whistleblower reports filed at more than 1,000 companies found it very reliable. Secondhand reports are “47.7% more likely than firsthand reports to be substantiated by management, which suggests that management views many secondhand reports as credible.“

Read our interview with Kyle Welch, the George Washington University business professor who co-wrote the study. Then check out his new piece in the Harvard Business Review.

Kyle Welch

Whistleblowing stories are all over the news. Some observers have attributed this to a systemic change in society. There are more stories about whistleblowing, the argument goes, because there are more crimes to report.

However, rather than an increase in criminal activity, we may instead be observing an increase in the willingness of employees to speak up

The researchers looked at anonymous data from NAVEX Global, which runs employee hotlines for some of the world’s largest companies.

Our study of the data led us to two important findings: First, whistleblowers are crucial to keeping firms healthy. The average manager seems to take these reports seriously and uses them to learn of and address issues early, before they evolve into larger, more costly problems. We also found that second hand reports are more credible and more valuable, on average, than firsthand reports.

Companies that have a higher volume of complaints from whistleblower hotlines report fewer lawsuits and smaller legal settlements, they found. The HBR piece quotes Daniel Garen of Pivot Point Compliance Management. He says employee hotlines “have been the single greatest source for uncovering problems at the organizations I have worked with.”

Unless they are used against employees, he noted.  Some lawyers advise whistleblowers to seek outside counsel first and approach company hotlines with care. The program’s aim is to protect the company, not the whistleblower, creating a built-in conflict of interest.
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