The United States Securities and Exchange Commission (SEC) has announced that it will award up to US$1.6 million to a professional compliance officer who disclosed information to the SEC in relation to financial misconduct that occurred in the compliance officer's company. According to SEC division of enforcement director Andrew Ceresney, the compliance officer "reported misconduct after responsible management at the entity became aware of potentially impending harm to investors and failed to take steps to prevent it".
The European Commission (EC) has announced that it has issued fines totalling more than €114 million after finding that four plastic foam manufacturing firms formed a cartel to "coordinate the sales prices of various types of foam".
Just in case Dodd Frank was falling off your radar, the SEC just reminded us that whistleblower awards are here to stay in a big (as in 14 million dollar) way. As reported by CNNMoney, the SEC recently awarded its largest monetary award ever, to an unidentified whistleblower. In fact, prior to this award, the largest award ever issued was $125,000, an amount over ten times less than the amount reported this week.
According to a University of Michigan researcher, an employee’s work environment plays a bigger role than previously thought on whether or not they will report unethical behavior. David Mayer, assistant professor of management and organizations, found that a person’s supervisor and co-workers play a major role in an employees’ decision to speak up about wrongdoing.
As we all know, whistleblowers still get no love. Myriad surveys and reports indicate that employees are becoming more and more comfortable reporting wrong doing, yet the number of whistleblowers who experience retaliation is also increasing. I think we can all agree “that’s no good!” With that reality in mind, I was encouraged to hear a whistleblower story on National Public Radio earlier this week.
While reading my alumni magazine from Boston College this morning, I came across an interesting discussion of the “Trolley Problem,” which is a thought experiment in ethics, first introduced by Philippa Foot in 1967. You can find a description of the experiment here and participate in a brief version of it here. The experiment involves questions about peoples’ decisions and the outcomes of their actions. While not intended to relate specifically to the problems and challenges surrounding modern day corporate whistleblower programs, I couldn’t help but draw parallels between the two.
Michael Horowitz, inspector general for the U.S. Department of Justice (DOJ), is creating a new position to assist whistleblowers who report waste and abuse to the office. Horowitz is currently leading an investigation into the Fast and Furious gun-trafficking operation. The operation was run by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). Whistleblowers who made complaints to Congress regarding the operations later reported they were threatened by some federal prosecutors and ATF officials with retaliation. The new position will train DOJ employees regarding their rights and will train managers on the consequences of retaliations.
Wall Street Journal: Justice Department Post to Aid Whistleblowers (8 August 2012)
(Source: Wall Street Journal)
The United States (US) Equal Employment Opportunity Commission (EEOC) has announced that shipping company Huntington Ingalls and its subcontractor Quality Coatings of Virginia (Quality Coatings) have agreed to pay US$80,000 to settle a retaliation lawsuit brought against them by the EEOC. According to the EEOC, the companies "discharged [Quality Coatings employees] Walter Strickland and Brian Glover at the request of managers for both companies after the [employees] provided written statements concerning a female supervisor whom they alleged had been kneeing her male subordinates in the groin".
In addition to the monetary relief, the companies are:
- prohibited from engaging in any further retaliation;
- required to alter and redistribute their anti-discrimination policies; and
- required to report to the EEOC.
EEOC's media release (30 July 2012)
According to a new study released by the Ethics Resource Center, employees at Fortune 500 companies report misconduct at a higher rate, but also face more retaliation, when compared to that of all U.S. companies. More than 50% of Fortune 500 employees surveyed said that they witnessed misconduct, compared to 45% of respondents from a 2011 survey covering all U.S. employees. However, 74% of Fortune 500 employees responded they reported the misconduct while only 65% of all U.S. employees responded in a similar manner. According to Patricia Harned, president of the Ethics Resource Center, the higher rates of reporting indicate the strength of corporate compliance programs among Fortune 500 companies. Fortune 500 employees also responded that they faced a higher rate of retaliation (24%) than all U.S. workers (22%) who responded to the 2011 survey. Despite the SEC’s new whistleblower program, only 1% of the Fortune 500 employees surveyed indicated they reported the misconduct to an outside source. 60% said they reported to their manager, 20% reported to higher management and 11% reported to a hotline. That said, 17% said they went outside the company with a second report, mostly because they were dissatisfied with the company’s response to their report.
Wall Street Journal: Survey finds Fortune 500 Employees Report more Often, Face more Retaliation (25 July 2012)
(Source: Wall Street Journal)
According to a survey conducted by whistleblower law firm Labaton Sucharow, 25% of executives view "wrongdoing as a key to success". Reportedly, 500 senior executives in the United States and the United Kingdom responded to the survey. According to Reuters, 26% of respondents said "they had observed or had firsthand knowledge of wrongdoing in the workplace", 24% said "they believed financial services professionals may need to engage in unethical or illegal conduct to be successful" and 16% stated that "they would commit insider trading if they could get away with it". A reported 30% of respondents stated they felt pressure to compromise on their ethical standards.
Related news item:
New York Times: Wall Street Short on Ethics, Report Finds(10 July 2012)
(Source: Reuters, New York Times)
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