Business Costs & Regulation

Ferreting Out Fraud at Your Company

What you should know about blowing the whistle on an employer.

Most companies have an internal system for reporting misconduct, waste, fraud or abuse. Hotlines are common. The best ones are anonymous, operated by an independent third party, staffed by trained interviewers and available around the clock. Whistleblowers should be able to check on the response to their report and to provide more information, if necessary.

There are lots of skeletons in office closets. Nearly half of workers surveyed by the Ethics Resource Center in 2011 said they'd observed conduct at work that they thought violated the law or their company's code of ethics. Of those, 65% reported their observations to someone at work -- the highest level the ERC has seen. One in five people said they experienced retaliation, up from 12% in 2007.

Should you use the hotline or report wrongdoing to outside authorities? That depends on the corporate culture. The compliance function -- the department in charge of policies and procedures to prevent and detect violations of rules, law or ethics -- should be independent, with the autonomy to protect whistleblowers. Few companies pay for tips, and that's as it should be, says compliance expert Donna Boehme. "Employees who do the right thing in reporting concerns should be embraced, acknowledged and treated like an asset. Most companies aren't there yet."

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