Fraud and workplace misconduct are some of the most discussed workplace issues. The frequency with which fraud and misconduct are in the news, makes it hard for some to believe workplace fraud is declining. Another issue piquing public interest is the treatment of whistleblowers and the retaliation they face for reporting misconduct. Regardless of established protections and company policies to fight whistleblower retaliation, the backlash they face could lead many to think twice before blowing the whistle on their company. Human Resource Executive Online published an interesting article titled “?”, based on the findings and conclusions from the 2009 fourth quarter results of The Network’s .
There are a few different ways to look at the decline in reported workplace incidents- is there actually a decrease in the number of incidents taking place or are people becoming afraid to report fraud?
The Quarterly Corporate Fraud Index
In 2008, the Index reported a rise in the number of reported internal fraud issues. However, the findings for both the third and fourth quarters of 2009 show a slight decrease in the number of internal issues reported. The results of the Quarterly Corporate Fraud Index for the fourth quarter of 2009 state that the “reporting of fraud/ workplace incidents accounted for 20.3% of all compliance hotline related activity from more than 1,000 organizations around the world.” However, there are a number of different reasons that could contribute to the decrease in fraud reporting.
“In the wake of an economic recovery, this leveling, even slight declining, of in-house fraud marks progress,” said Luis Ramos, chief executive officer of The Network. “Yet, fraud reporting only tells part of the story. A leveling of the percentage of fraud reports could be the sign of a rebounding economy, a strong compliance program, or, in contrast, mean that employees are not aware of or comfortable with anonymous whistleblower reporting systems.”
Compliance programs, codes of ethical conduct and the introduction of anonymous reporting systems in the workplace have been a focal point for companies in recent years. Companies have invested a significant amount of time installing these reporting systems and training employees on how to use them. The success of reporting systems ultimately boils down to the ability for management to communicate and train employees to make the right decision to report fraud and misconduct. Employers must also make sure that every employee is aware of the system and has the ability to access it and report issues in an anonymous manner.
Understanding the impact ethics and corporate culture have on a company has altered company goals, and in some cases, has even resulted in workplaces that encourage employees to report observed misconduct and reward employees (and executives) for making ethical decisions. Companies are gaining recognition for the development of “best in class” ethics programs and codes of conduct that govern the workplace- one example is Ethisphere, a think tank in New York City that publishes lists and rankings for ethical businesses, people and grades corporate codes of conduct.
Companies strive to be placed on these lists and recognized for their contribution to the creation of an ethical workplace because it communicates their ethical mission to consumers and can even lead to financial benefits- for example, Ethisphere listed Ford Motor Company as one of the companies on their 2010 World’s Most Ethical Companies list, since the release of this list last week, .
Some contribute the decrease in reported fraud to the success of these programs and the shift towards an ethical “tone at the top”. Many companies that have faced misconduct allegations in the public eye, such as Cisco Systems, have been quick to rid the company of executives and other employees who work against the ethical culture.
A report from BDO LLP, The Network’s partner on the Quarterly Corporate Fraud Index, has discovered that:
“9 out of 10 larger frauds are not reported to authorities. As Timothy Mohr, Certified Fraud Examiner and partner at BDO Consulting, explains, “companies need to continue to protect themselves from fraud regardless of where the fraud incident reporting percentages fall. This will build a stronger ethical foundation that will pay off for companies as the economy recovers.”
This statistic raises the point that some employees may not feel comfortable reporting misconduct or fraud that they observe in the workplace. Employers can establish anonymous reporting systems to gather tips and other information, however, chances are, once a case warrants an investigation, the claimant usually needs to be involved in the process in order to bring forward evidence and reasoning to support their claim- therefore, the ability to conceal their identity becomes sacrificed. In many cases whistleblowers tend to lose their jobs for making a complaint or they face retaliation which makes their workplace intolerable, forcing them to quit- we discussed these whistleblower situations in our post “Who is Most Likely to Uncover Workplace Fraud?”
Either way, there are many ways to interpret the causes of the decrease in reported misconduct. If anything, the study and the articles written about it send a message that committing to ethics is something that all companies need to work on in order to reduce risks for your company, its employees, the public and society in general.