FCPAméricas Blog

A “Speak-Up” Culture: Encouraging Employees to Report FCPA Violations Internally First

Author: Matteson Ellis

Section 922 of the Dodd-Frank Act, which establishes SEC whistleblower mechanisms, is now in full effect. The SEC announced last week that it has made its first whistleblower payout. The Chief of the SEC’s Office of the Whistleblower said that the office is receiving, on average, eight tips a day. SEC Chairman Mary L. Schapiro stated, “We’re seeing high-quality tips that are saving our investigators substantial time and resources.”

As if FCPA risks were not already high enough, now companies have to consider whistleblowers. How to manage this threat? By encouraging employees to report FCPA violations internally first, through pre-existing compliance programs.

Internal reporting puts the company in the driver’s seat. It allows the company to investigate, remediate, and possibly disclose issues, thereby mitigating ultimate fines and penalties. The company has 120 days to act (here are the rules). The alternative is risky – the employee could go straight to the Government, and no company wants to receive a subpoena.

How can companies encourage employees to report violations internally? By promoting, what one multinational company calls, a “speak-up” culture.

A company must first ensure that it has an appropriate reporting infrastructure in place. The best internal reporting structures I have seen are the ones that are carefully thought out to respond to the company’s specific corporate structure. If the company is highly decentralized, then it should have an ethics officer at each operational unit tasked with handling complaints. Employees should have easy places to report. Hotlines are a must. Managers play a role too. They are the eyes and ears on the ground and are often the best conduits for compliance reminders. They can be incentivized to take their reporting-awareness duties seriously. Systems must educate all actors in the reporting chain about which issues to escalate and how to track reports. There should be mechanisms in place to ensure documentation and tracking of the reports.

Beyond structure, a company needs to consider culture. What is the attitude of the organization with respect to making complaints internally? How comfortable do employees feel sharing concerns? Matt Kelly of Compliance Week has discussed this challenge. Some employees might feel hesitant: “I’m afraid I’ll get fired,” “Management will never listen to me anyway,” “I’ll be branded a trouble-maker and miss that next promotion.”

To change this, FCPA attorney Mike Volkov recommends creating specific incentives for reporting, removing fears of retaliation, and bolstering communications about programs. I would add “self-assessment” to this list. It is essential for the company to gather information about whether the culture currently facilitates reporting.

One way to do this is by surveying employees. Use employment opinion surveys to ask them if they are happy in their jobs, comfortable with their management, and willing to raise their hands. The responses can reveal attitudes throughout a business’s operations. They can inform messaging to increase participation. The company can retool its mechanisms to fill pockets of need. Data will inform striking the delicate balance between too little information and information overload. It will guide design of targeted training to ensure comprehensive awareness.

The whistleblower threat can never be completely extinguished. But risks can certainly be minimized.

The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.

The author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author.

© 2012 Matteson Ellis Law, PLLC

Matt Ellis

Post authored by Matt Ellis, FCPAméricas Founder & Editor

Categories: Anti-Corruption Compliance, FCPA, Internal Reporting, Whistleblowers

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  1. High Tide: From Chinese Banks Probed to MTN’s Exports | Coffee Talk Shop… Says:

    […] runs a guest post from Australia on the Securency bribery scandal. The FCPAmericas blog discusses a “speak up” culture in the wake of the first Dodd-Frank whistleblower award. Mike Volkov […]

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