Compliance and ethics officers should take comfort in a recent hotline benchmark report, which indicates improvements in ethics and compliance programs, aided by additional awareness of whistleblower protections.
Those were among the conclusions drawn from an analysis of sanitized data from reports made in 2014 through the hotline and case management system of ethics and compliance software and services provider NAVEX Global. The data encompassed 2.2 million reports over the past five years, representing 32 million employees at more than 4,600 companies.
According to findings from NAVEX Global’s annual “Ethics and Compliance Hotline Benchmark Report,” substantiation rates for hotline reports by employees jumped 125 percent—from 12 percent in 2013 to 27 percent last year. “This significant increase may be a sign that ethics and compliance program leaders are taking a more serious approach to managing and investigating allegations of retaliation,” NAVEX Global said.
The report also revealed that substantiation rates for repeat reports were slightly higher than rates for first-time reporters. According to the report, repeat reporters had a substantiation rate of 42 percent, compared to the 38 percent rate of first-time reporters. “Compliance professionals need to continue to be careful not to let bias against repeat reporters affect their investigation of allegations made by this group,” the report stated.
Types of Allegations
For the first time since launching the report five years ago, NAVEX Global analyzed the intention behind employee reports to determine what percentage of reports involved an allegation of misconduct versus an inquiry related to policy or company practices. According to the findings, data from the past five years indicates that employees overwhelmingly are using reporting channels for allegations, staying relatively steady at 80/20 percent.
“Companies whose ratio is significantly different in favor of allegations may want to consider boosting awareness of their hotline as a helpline that employees can use to request ethics and compliance information and guidance—not just report misconduct,” the report stated.
NAVEX Global categorized all reported allegations into five categories:
Accounting, auditing and financial reporting;
HR, diversity, and workplace respect;
Environment, health, and safety; and
Misuse, misappropriation of corporate assets.
HR, diversity, and workplace issues—such as discrimination, harassment, compensation complaints—continue to lead the category of allegations by a significant degree. Business integrity issues—such as bribery, falsification of documents, and fraud—were the second highest reported category.
Case Closure Time
The time it takes to close a case continues to creep up from a median of 36 days in 2013 to 39 days the year prior. “With longer closure times, organizations risk loss of employee trust and confidence in leadership, and the threat of getting too close to the waiting period for reporting to external regulatory bodies,” said Carrie Penman, chief compliance officer of advisory services for NAVEX Global.
Cases relating to accounting, auditing and financial reporting allegations take the longest to close, and yet the substantiation rate for this type of allegation dropped by ten percentage points over the last year, and below 50 percent for the first time in several years.
The report also showed that the five-year trend of rising report volume continues, with a 44 percent increase in volume per 100 employees since 2010. “This trend is likely the result of increasing maturation of E&C programs, as well as additional awareness of whistleblower cases and protections,” the report stated. “Overall, it’s a promising sign that E&C programs are moving in the right direction: encouraging employees to report misconduct internally so it can be investigated and addressed.”
Download NAVEX Global’s 2015 Ethics and Compliance Hotline Benchmark Report here.