SEC Whistleblower Awards Have Little Effect on Internal Tips

Most companies have seen no change in volume on hotlines, IIA survey shows.

whistleblowerThe Securities and Exchange Commission’s awards for corporate whistleblowers haven’t had much impact on the tips that companies receive via their internal hotlines, according to a recent survey by the Institute of Internal Auditors.

In August 2011, the SEC started a program, mandated by Dodd-Frank, which awards whistleblowers from 10% to 30% of any financial recovery the agency makes as the result of information the whistleblower provided. Companies fretted that the prospect of an award might cause employees to bypass internal procedures for reporting fraud and other problems and instead head straight to the SEC.

Ramos notes that in response to the SEC awards, companies made a push to ensure that their employees were aware of internal reporting processes. “Many of these companies really redoubled their efforts to communicate about their existing programs and made these programs much more visible to their employees,” he says.

Companies also took steps to educate employees about anti-retaliatory policies concerning whistleblowers, he says, and they tightened up their investigative processes and their methods for reporting back to whistleblowers. In the past, while companies were investigating complaints that had come in, they often didn’t keep the employees who had notified them of the problem informed, Ramos says. “What we heard from employees was that when they didn’t hear back, they thought the organization wasn’t doing anything about the issue and it made them less likely to report in the future.” Companies have started to use hotline follow-up mechanisms to let employees know that they’re taking action, he says.

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