Corporate Whistleblower Programs Can Reduce Fines and Limit Lawsuits

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Sep 27, 2019

Note: It was a tip under the US government’s whistleblower program that lead to the current Congressional investigation into a potential quid pro quo for Ukranian foreign aid. Spurred by the #MeToo movement, many companies have begun to adopt programs encouraging employees to report sexual harassment — and other policy and legal violations — anonymously.


Should you penalize an employee who sheds light on your company’s internal wrongdoings?

The answer lies in whether your company has a whistleblower program—or not. Worryingly, a CNBC report claims “studies show between 30 and 40% actively discourage whistleblowing”

This sets these businesses apart especially in today’s professional landscape where employees are becoming more emboldened to speak up:

All of these events prove companies can no longer brush their problems under the rug and hope for the best.

A whistleblower program can be a benefit

Encouraging your employees to reveal “bad” info may seem ridiculous at first glance. But, an analysis of thousands of whistleblower cases makes a strong case that reporting is a good thing for businesses.

A report of the study by researchers at George Washington University showed companies with strong internal whistleblowing policies reported a 6.9% decrease in pending lawsuits. The study also showed that companies with a strong reporting program – a hotline — paid 20.4% less in settlement costs. A whistleblower program reduces losses further by significantly cutting down on risks (e.g. accidents) and misconduct, according to the study.

In the US, penalties for safety violations can run into the hundreds of thousands, even millions of dollars for serious and repeated violations.

By encouraging whistleblowing, you give your employees a platform to report dangerous acts which could harm the people involved and land your business in hot water if left unattended.


Another benefit of having a whistleblower program is to maintain compliance.

Countries all over the world are setting up stricter regulations to protect whistleblowers in the workplace. The EU, for instance, recently adopted the Whistleblower Protection Directive as a means to “protect and encourage reporting of breaches of EU law.”

This advantage extends to other regulations too (e.g. GDPR) as employees are likely to call out misconduct related to sensitive issues like the handling of personal data and corruption.

It’s important for businesses to comply with these regulations to keep their company operations transparent and legitimate.

How to establish a program

Implementing a whistleblower program won’t work well if your employees aren’t informed and on board with it. Here’s how you can help them accept it.

1. Make it easy to report issues

The most important step is to create a channel or platform for concerned employees to safely and discreetly report problems. Anonymous hotlines and technology can make reporting easy and anonymous.

But avoid creating a bureaucracy. It only discourages whistleblowing when a process is difficult and the problem takes too long to be solved.

A good way to overcome this issue is by appointing a chief ethics officer to handle whistleblower claims. An alternative is to hire an external party to investigate claims instead of doing it internally. Many companies have chosen to address sexual harassment claims by engaging an outside law firm.

2. Protect anonymity

Anonymity must be ensured for all whistleblower claims.

The fear of being disciplined — or worse, fired — due to being exposed is the reason why many employees remain quiet, even if it means allowing gross negligence to happen in the workplace.

Every report should be kept private and confidential regardless of the people or the stakes involved.

Exposing the identity of a whistleblower is a violation that carries severe punishment in some regulations including OSHA’s stance on whistleblowing. The Securities and Exchange Commission encourages whistleblowers who want to remain anonymous, but still share in the proceeds of an award resulting from their tip to go through an attorney.

3. Do not punish whistleblowers

There should be zero consequences for whistleblowing in your business unless the claim is fake.

Your employees should never feel like they’re in trouble for reporting concerns to the board or senior management. The best course of action is to take no action at all against the whistleblower or better yet, incentivize them.

Incentives are a great way to reward justified whistleblowers. Just as the SEC offers incentives, many states as well as other governments and their agencies allow whistleblowers to share in monetary penalties.

Be cautious when providing incentives. You don’t want to create an environment where your workers are constantly spying on each other. Every claim should be reviewed comprehensively before any incentives are given and penalties, including termination, should be assessed for making false claims.

4. Train the staff

Staff training is a key factor to ensure workers understand they have the right to complain about unsafe, illegal and unethical activity. They need to know what these behaviors look like and how and when to make a report.

Managers must be trained not to retaliate against whistleblowing workers, as well as what to when a report is made to them. Many complaints can simply be handled at their level, but they have to recognize when its systemic or so significant as to be reported up.

A whistleblower program is not a staple of most organizations. So, it will take time and practice to make it effective.

Save your brand

With a strong whistleblowing initiative, your employees will enjoy their work a lot more as they’re free to report any misconduct that could affect them. It also reduces the temptation for a worker to make their case on social media.

With headline-worthy fines being increasingly common, you can save your organization millions in potential damage from lawsuits and fines – and the lasting damage to your brand — by giving workers an honest, consequence-free way to report concerns