Maintaining high ethical standards requires courage from those who tell as well as those who listen.

The increasing focus on workplace ethics, driven by press reports of misconduct and legislative and corporate governance requirements, raises the question of how organisations can minimise workplace misconduct.

An approach which is increasingly being used is to tap into employees’ knowledge as a way of uncovering unethical behaviour. This rests on the assumption that, although there are cases when knowledge of wrongdoing is limited to the perpetrator, in most cases there are other people who know, or at least suspect, that something is not right.

One approach which is increasingly being used is an ethics hotline or ‘whistle-blowing’ system. It is also intended to provide an anonymous channel for employees to report knowledge of misconduct without threat of retribution. But key to its effectiveness is the question: ‘will anyone tell?’

Transparency International’s Global Corruption Barometer 2010, which surveyed more than 91,500 people in 86 countries, provides an encouraging finding about people’s willingness to report misconduct. Seven out of ten respondents said they would report an incident of corruption, with this percentage increasing to 90% in the Americas and the European Union.

The fact that this form of ethics reporting enjoys legislative support in South Africa (and elsewhere) should favourably influence people to share their knowledge of misconduct. The Protected Disclosures Act (No. 26 of 2000), the so-called ‘whistle-blower act’, specifically aims to protect employees from occupational disadvantage for reporting wrongdoing. Adding to that, many larger companies have their own related policy as well, and most hotline services are run by external providers thus further entrenching the security of reporting.

However, many people are still reluctant to report unethical conduct. This is especially the case if the misconduct is happening at senior management level or if it is systemic in the organisation. Employees feel vulnerable to a range of adverse consequences, whether dismissal, demotion, compromised promotion opportunities, reduced prospects for salary increases or bonuses, or more subtle forms of victimisation.

To optimise the effectiveness of an ethics reporting system, the following factors need to be addressed:

  • The organisational culture needs to be conducive to reporting misconduct, and employees should be encouraged to raise concerns. High levels of ethical awareness and transparency can contribute to such an environment. If this is absent, a situation can arise such as at Societe Generale in 2007: trading irregularities were not reported to bank management by employees who noticed them because “this was not specifically part of their job description”;
  • A perspective which erodes the effectiveness of this type of ethics reporting is that not everyone views it approvingly. Instead of being seen as a loyal employee speaking out for the benefit of the organisation, the whistle-blower is sometimes treated with hostility as an informer. It can give – and has given – rise to a situation where the institution ‘shoots the messenger’ for bringing unwelcome news;
  • The effectiveness of an ethics hotline also depends on the action that follows the information. It takes real courage to speak out, so if no constructive action follows, employees are less likely to report anything again;
  • Who takes such action depends on where this has been assigned in the organisation. If the company has a social and ethics committee, they should receive and manage ethics reports. If not, the reports should be dealt with by the senior management team (such as an executive committee). Charges against management should be directed to the board who may choose to have the issue investigated by a suitable external company;
  • What action is taken – such as a forensic audit, an investigation by an external consultant, a revision of procedures or an internal audit – depends on the nature of the issue and needs to be appropriate for the charge. The action must also balance the importance of the charge with the legal principle of ‘innocent until proved guilty’ relative to the accused; and
  • An additional and crucial factor is accurate and truthful reporting. The anonymity that offers protection and security for the honest reporter can also create opportunities for false or malicious reporting. Whoever reviews the ethics reports, be it senior management or the ethics committee, needs to be aware of the potential for abuse or inaccuracy, but without allowing suspicion to undermine or discredit accurate reports received. Creating a responsible review system, which includes a process for verifying the facts, is essential to protect people from false accusations.

Using this approach to reduce unethical behaviour warrants constantly bearing in mind that it not only takes courage to speak out, but it may also take courage to listen. Those tasked with this job may have to face things they really don’t want to hear and don’t want to believe. It is therefore a system which should be used with wisdom.

By Cynthia Schoeman
Published in HR Future, October issue.