How can firms prevent ethical problems escalating?

Ethical scandals in different companies and sectors dominated world news headlines in 2015. These high profile media stories can ruin the reputations of individuals and organisations. Although companies can be nervous about employees speaking up, Simon Webley, director of research for the Institute of Business Ethics (IBE) answers our questions and tells us how corporate whistleblowing can prevent problems escalating

“Approximately half of employees aware of misconduct do not ‘speak up’ about their concerns”
– IBE, Ethics at Work research

Simon_webber1. How would the IBE define corporate whistle-blowing?
Corporate whistleblowing refers to employees, and other stakeholders, who witness unethical, illegal or dangerous behaviour, and raise their concerns.

At the IBE, we differentiate between ‘whistleblowing’ and ‘speak up’. Although these are often used interchangeably, whistleblowing takes the concern external (either to a regulator or the media) and occurs after the event.

In a corporate context, the IBE advocates the promotion of ‘Speak Up’ because its connotations are generally more positive – encouraging employees to voice their concerns early, without fear of retaliation. The frequency and content of a speak up procedure acts as an early warning system and can prevent misconduct developing into a reputational crisis.

2. What is the danger to company reputation of failing to address issues raised by corporate whistle-blowers?
The obvious dangers are the stories we read regularly tin he news every day. Those companies which didn’t listen to those who raised concerns internally now face significant scandals, loss of value, and loss of public trust from which they may never return. At the most extreme level, failing to act on concerns can lead to much worse than loss of business – lives can be lost.

That is why an effective speak up procedure is so important. To put it succinctly: raising what may seem a  small concern, can help avert a massive crisis.

3. What has your recent research revealed about corporate whistleblowing in different European countries?
Our research headlines reveal that roughly half of UK employees who were aware of misconduct do not ‘speak up’ about their concerns. The source of this is the 2015 IBE Ethics at Work survey.

It reveals that, although employees are now more aware of elements of an ethics programme than ever before, nearly half of British employees (45%) are not willing to raise their concerns about misconduct.  Of those that did speak up, the proportion who say that they were not satisfied with the outcome has doubled: 61% of those who did speak up say they were dissatisfied with what happened next (compared with 30% in 2012).

Across continental Europe, the picture is equally pessimistic: fewer of those aware of misconduct raised their concerns (down to 44% from 51% in 2012).

4. Why are attitudes to corporate whilstleblowing so different in countries like the UK, France, Germany, Italy and Spain?
We found distinct differences between each of the continental European countries when it comes to attitudes about corporate whistle-blowing.

Germany is the only country surveyed where levels of awareness of ethics programmes did not generally fall – German employees reported a higher level of awareness of codes of ethics and speak up (whistleblowing) phone lines than in 2012.

Spain is the only country surveyed in which the proportion of employees who said that honesty is practiced ‘always or frequently’ has increased.

Italian employees are most aware of speak up lines and ethics training. Awareness levels of a means of reporting misconduct confidentially (35%) or training on ethical standards (39%) are higher in Italy than in the other three continental European countries.

In France, fear of retaliation is less of a barrier to speaking up than in other countries. Only 13% of respondents in France said that they did not raise their concerns of misconduct because they felt it might jeopardise their job.

5. Why is it important for companies to have effective whistleblowing policies?

Encouraging an open corporate culture has many benefits:

  • Protect the company  – encourages employees to discuss their concerns internally before going outside, either to the media or the regulator, and ultimately protects organisations from negative publicity. The value of whistleblowing is recognised with the Association of Certified Fraud Examiners reporting that it is one of the most effective ways to uncover fraud.
  • Protect employees – sends a strong message to all levels that bad practice will not be tolerated. It can also reassure employees that their concerns are important, and encourage problems to be brought to the attention of management from within the company before they become a crisis.  Employees can be protected from health and safety issues or bullying and harassment from of other members of staff.  Good employees are more likely to be retained with increased staff morale and loyalty. Perhaps the most compelling reason is that it makes for a happier and more productive workforce when they believe and see that a culture of mutual trust exists.
  • Protect customers and the public – Customers and the public need to be protected from the effects of malpractice, for example, breaches of health and safety procedures or a failure to comply with hygiene standards.  Staff often have knowledge which may divert disasters if effective Speak Up procedures are in place.

6. Are there common barriers preventing more corporate whistleblowing?
In the 2015 Survey we found out what was discouraging employees from speaking up.

Among those who were aware of misconduct, the most common reason across continental Europe for not raising concerns is ‘not believing that corrective action would be taken’ (26%). The two most prominent reasons given why British employees did not raise their concerns of misconduct in 2015 are: feeling that it may jeopardise their job and not believing that corrective action would be taken.  No respondents said that they did not know who to contact.

In stark contrast to when this question was first asked in 2012, the majority of respondents are now not satisfied with the outcome when they raise their concerns of misconduct. This appears especially to be the case for women, younger employees, and employees in organisations with an unsupportive ethical culture where 71%, 79% and 97% respectively said that they were not satisfied with the outcome.

This difference may simply be a communication issue – the outcome of investigations is not fully communicated to the employee who made the call – but it has a serious side effect.  It generates a lack of confidence in the system, and mounting distrust in what the company ‘says’ versus what it ‘does’. Employees take away the message that the motivation poster urging them to speak up is just window dressing; this breeds cynicism, not just in the speak up process, but in the ethical values of the organisation itself.

7. How can companies strengthen their corporate whistle-blowing procedures?
If organisations have the courage to be open about the outcomes of raising ethical concerns, this helps to give staff the confidence to share their concerns with each other and with the company.  Speak up will be encouraged once employees know that their concerns will be listened to and acted upon.

Fear of retaliation is an issue, and one of which employers need to be aware. Retaliation is not always easy to detect. It may be small acts which build up over time making the life of the person who raised the concern miserable.

It can take a lot of courage to speak up. It is time to recast the whistleblower as a hero – working for the good of the company, of colleagues and customers – and to be proud of those who have the moral courage to raise their concerns.

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