“WHERE THE @#%&! IS MY PEANUT BUTTER?”
As a board member, are you prepared to get a phone call that complains about somebody taking somebody else’s lunch out of the fridge in the breakroom? Of course not.
However, there are phone calls, emails or other communications that you may want to receive from the average employee from time to time. The scandals at HP, Toyota and Fannie Mae are perfect examples as to why.
No one works in a vacuum. Stock option backdating, Hewlett Packard pretexting, Fannie Mae’s accounting manipulation, Toyota’s CEO harassment–all recent scandals. A commonality in each is that someone knew something was wrong and raised their concern with their superiors. And in each case their concern was ignored.
Would such cases have had different outcomes if the concerned employees were able to easily contact someone on the board of directors once they saw that their concerns had not been addressed?”
Would the employee even have used that “board direct” channel if it had been promoted to them? Would that board member have been overwhelmed by inane reports of lost peanut butter, thereby making such a channel ineffective?
The answers are Maybe, Probably, and No.
What logical reason is there, other than a recalcitrant CEO or a board with a lack of thirst for information, to not make this additional channel available to report compliance and ethics concerns to the board? Of course, it should not be the FIRST channel (direct supervisor is better), or even the SECOND (internal reporting hotline or ombudsman) –but rather a channel of third or fourth resort.
COULD A CALL OR EMAIL TO THE BOARD FROM “JANE” PREVENT SCANDAL?
Think about it. If the board had known about the problem it could have launched an investigation, figured out a resolution, and possibly prevented a scandal.
Perhaps the directors of Hewlett-Packard could have prevented the allegedly illegal investigative tactics from being used (as emails expressing reluctance among the parties that oversaw the investigation are dated from before the worst of the tactics were employed). Instead Hewlett-Packard’s reputation ends up getting dragged through the public mud behind horses and valuable management attention diverted.
Perhaps the CEO of Toyota could have been educated and/or disciplined, and the victimized employee offered a separate position of equal or better stature and an opportunity where she would no longer report directly to the CEO. Instead, Toyota’s hugely successful North American operation gets embarrassed in the press for sexual harassment, is forced publicly to deal with the issue that could have been handled internally, and loses an otherwise successful leader to forced early retirement.
Perhaps the directors of Fannie Mae could have stopped the earnings manipulation sooner and terminated the offending parties, possibly saving millions in investigation fees, protecting the reputation of the institution, and avoiding the subsequent civil lawsuits filed against them.
WILL “JANE” MAKE THE CALL?
Stuff happens. A big risk for many organizations is that employees fail to report misconduct. Even worse is when the organization responds inadequately. When “Jane” becomes aware of a compliance and ethics concern and brings it to the attention of her supervisor, this is an extremely important first successful step in the process as all too often an employee is not willing to express his/her concern. Naturally this process collapses if the supervisor stonewalls “Jane’s” concerns, or even worse, retaliates.
However, the profile of an individual who is willing to take the risk of reporting observed misconduct or significant ethical dilemma is important. This type of person has already proven a willingness to take the step to report–and if they are aware of a second or third channel for re-reporting their concern if not initially addressed, most oftentimes they will.
The existence of this backup reporting channel to the board is supported by the Principles of Prosecution Memorandum written by the U.S. Department of Justice in 2003 (commonly known as the “Thompson Memorandum”), which states that in determining whether or not to prosecute an organization, one factor that a prosecutor should consider is whether “the directors established an information and reporting system designed to provide management and the board of directors with timely and accurate information sufficient to allow them to reach an informed decision regarding the organization’s compliance with the law.”
WILL “JIM” COMPLAIN ABOUT HIS PEANUT BUTTER?
A concern expressed by some board members is that they fear getting deluged with too many complaints, reports and concerns, some (or many) of which may be trivial or silly. They also fear that with this envisioned deluge, an important complaint may be missed among the volume, and no follow-up investigation carried out. This complaint would later be found in electronic discovery and introduced as evidence that the board was ”aware” but ”negligent.” It doesn’t happen that way.
The channel to the board must be communicated as ”available” but not ”primary.” In other words, employees need to pursue the appropriate channels first. The board reporting is to be used by employees if they feel that their ethics or compliance concern is not being properly addressed by the company’s management and that they have exhausted their other options.
Do you really think an average employee is going to call someone on the board to complain about peanut butter? Most employees would never even consider it. Once in a while you may encounter the outlier who is clueless or raises a typical HR issue, but having such a reporting channel available may save your company from areal problem.
In the words of one board member who requested anonymity, “I feel safer encouraging this type of reporting. The price is that you will get a ridiculous call or email from time to time. Simply forward those on to Human Resources. Perhaps oddball complaints are a bit of a self-selection process.”
Considering the facts, shouldn’t your company make this option available too? In fact many are. But remember if you do put such a channel in place, unless awareness of its existence is promoted, the phone will never ring.
