The unspoken reality in the corporate world is that many whistleblowers are deemed complainers, too difficult to get along with or (my personal favorite) “not a team player.” These terms taken on additional significance when they are laid against a female whistleblower as they are usually paired with the words ‘too emotional’ or a word which rhymes with “witch.” Yet, Congress, regulators and even the companies that verbally demean whistleblowers recognize that persons who have personal knowledge of wrongdoing are often best placed to report it.

The Man From FCPA thought about all of this when reading recent reports that the Securities and Exchange Commission is investigating PepsiCo for allegations the company’s former general counsel, Maura Smith, was terminated “in retaliation for the way she handled an internal probe into potential wrongdoing in Russia.” The internal investigation regarded Pepsi’s purchase of the Russian entity, Wimm-Bill-Dann, a Russian maker of dairy products and juices around some of its business practices, specifically the entity’s financial reporting of incorrect revenues. In a statement, PepsiCo said, “as soon as PepsiCo became aware of the conduct, it fully investigated and remediated the issues, none of which were material to PepsiCo’s financial statements.”

After the initial allegations were raised, Smith directed a thorough investigation to turn over “all the rocks.” This subsequent investigation uncovered numerous other potential legal violations including violations of the Foreign Corrupt Practices Act. Smith wanted to make a full report to Pepsi’s board of directors.

In a plot twist worthy of the Greek gods, one of Pepsi’s outside lawyers contacted the company’s CFO to complain about the report to the board. Smith was subsequently prevented from reporting to the board, and the board was never informed about the problems at this Russian entity.

Smith thereafter resigned from the company “to pursue other opportunities.” Conveniently, Pepsi gave her a $6 million sendoff package and an anti-disparagement clause attached to the golden parachute. It was not clear if this anti-disparagement contained language prohibiting her from reporting illegal or even unethical conduct to regulators or others.

This now-public investigation makes clear the need for every chief compliance officer to revisit their culture around whistleblowers and retaliation, both direct and subtle. If a general counsel is terminated for being too difficult in asserting that illegal or unethical corporate conduct be reported at least to the company’s board of directors, what does that say about the overall ethical health of the organization? 

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